1.7 million over-50s cut pension saving amid Covid-19

Nearly one in eight workers (12 per cent) aged over 50, equal to around 1.7 million workers, are saving less for retirement due to the financial pressure of Covid-19, according to research from Legal & General Retail Retirement.

This is despite "hardly any" (2 per cent) pre-retirees actively planning to save less for retirement as a result of the pandemic in August 2020.

The research showed that workers over 50 have cut their pension savings by an average of £142 a month in light of the financial pressure stemming from the pandemic.

The firm warned that reductions of this size could equate to halting contributions entirely for many savers, with savers often having "no idea" as to when they will start saving again.

Further analysis also revealed the reality of halting contributions, showing that workers in their fifties on the UK average wage of £30,566 a year and have stopped saving into their pension amid the pandemic could be £49,790 worse off at 67.

This increased to more than £65,000 worse off by the age of 70 if they fail to start saving again and continue working full time until retirement.

However, L&G Retail Retirement emphasised that by re-instating pension contributions in three years’ time, individuals would be able to close this gap to be just £9,236 less.

It also stressed that opting back in sooner will limit the impact further, with a break of a year representing a reduction of £3,101 and a break of six months just £1,729.

Commenting on the findings, Legal & General Retail Retirement CEO, Andrew Kail, said: “As the pandemic has progressed, we have seen increasing rates of retirement inequality in the UK.

“While some older workers have seemingly benefitted from the lockdown, large numbers have had to make some really tough decisions around their finances.

“The last year has thrown millions of people’s retirement plans off course and we now have 1.7 million people effectively opting-out of pension saving as they struggle to make ends meet.

“We know that many pension pots in the UK will not provide the income people hope for in retirement, and for those in their fifties, taking a hiatus will have a big impact on their savings and ability to retire as planned."

He added: “It is therefore important not to lose sight of the long-term benefits of saving into a pension to secure a comfortable retirement.

“Although current circumstances are proving challenging, we would urge those who have already saved something for retirement to maintain their contributions.

“Pausing them may be tempting, however people should explore every possible alternative before considering this.

"Prioritising enrolling back into the scheme as soon as possible, to limit the losses and take advantage of the tax breaks, is also advisable for anyone who has already stopped."

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