People are being urged to not pause their pension contributions as cost of living pressures may leave them thousands of pounds worse off in retirement.
According to calculations, someone who started working with a salary of £25,000 per year and paid the minimum contributions from the age of 22 could end up with nearly £457,000 in retirement. Pension provider Standard Standard Life calculated that if the pension payments are paused at the age of 35 for just one year, they could end up with just over £444,000 by the age of 68 - £13,000 less.
Furthermore, if someone pauses for two years they could be £25,000 worse off and if they pause for three years it could total £38,000 worse off. Standard Life surveyed 2,5000 customers and discovered that if they had cut down on expenses, 15 per cent would put less money into savings while 6 per cent would reduce their pension contributions.
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Meanwhile, 93 per cent said that increasing costs and high inflation are going to have an impact or already have had an impact on their financial situation. In the first quarter of this year, 88 per cent said the same.
More than three quarters (77 per cent) of people expect to cut back on spending or saving, rising to 86 per cent with an income of less than £20,00. Similarly, some 83 per cent of households with between £20,001 and £30,000 in income said the same, as did just under three quarters (72 per cent) of households with £70,001 to £100,000 in income and more than half (56 per cent) of households earning more than £100,000.
Jenny Holt, managing director for customer savings and investments at Standard Life, said: “Consumers have had to contend with a lot so far this year, and since April alone we have seen the increase to the energy price cap, higher national insurance contributions, as well as inflation recently reaching 9.1 per cent. This is of course taking its toll on people’s finances, with many having to cut back on spending and saving as a result.”
Tim Gosling, head of policy at B&CE, provider of the People’s Pension, said: “Based on the evidence presented in the research, it appears that most people wouldn’t consider pausing their pension contributions due to cost-of-living pressures and this corresponds with what we have seen. Saving through automatic enrolment held up extremely well under the pressures of the pandemic and it is likely that this will be the case during the current economic turbulence many people are currently experiencing.”
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