Low earners who lost income during the pandemic have missed out on a combined £122m in pension savings from their employers, according to analysis from Scottish Widows, prompting calls for "urgent reforms" to support savers in periods of hardship.

The firm found that nearly a third (31 per cent) of those earning between £10,000-20,000 per year have reported a decline in their finances during the pandemic, with nearly one in five (18 per cent) experiencing a drop in income.

This has in turn compounded retirement fears, as over half (54 per cent) of workers stated that they are now concerned about running out of money in their later years, while nearly a quarter (23 per cent) are expecting to “work until they drop”.

Furthermore, in light of these job and income losses, Scottish Widows has estimated that lower earners have missed out on a combined £122m in pension contributions from their employers during Covid-19, with this figure almost tripling to £325m if including personal contributions.

Scottish Widows called for “urgent reforms” that would entitle those on low incomes to continue to receive contributions from their employer, if they are unable to meet the costs of employee contributions during a period of financial hardship.

Scottish Widows head of policy, Pete Glancy, commented: “Covid-19 has had a massive impact on the nation’s finances, particularly on those who were already struggling financially.

“Those working from home have benefited from reduced commuting costs and everyday expenses, allowing them to boost their savings.

“But those on lower incomes – and less likely to have worked at home during the pandemic – have seen their finances hit hard and are leaning on savings to cover bills and short-term needs.”

However, the firm clarified that there is some cause for optimism, as the proportion of people saving adequately for retirement and putting away the recommended minimum 12 per cent had reached a record high of 61 per cent this year.

This was mostly driven by progress amongst younger savers, with 6 per cent more 30-39 year olds now saving adequately compared to last year, with this in turn attributed to a reduction in living costs, and the government’s decision to continue supporting pension payments through the Coronavirus Job Retention Scheme (CJRS).

Glancy commented: “The habit of saving for retirement has proved to be incredibly resilient given the financial pressures people have faced over the past year and even a modest growth of 1 per cent is positive news. But this also comes with a health warning.

“The positive impact of auto-enrolment has plateaued and we’re unlikely to see the number of people saving dramatically increase in the years ahead.

“While 12 per cent of earnings going into your pension will provide a basic standard of living in retirement, a minimum of 15 per cent is more realistic for anyone hoping to enjoy a more comfortable retirement.

“And there are great swathes of the working population – for example, the self-employed and those earning less than £10,000 – for whom auto-enrolment doesn’t apply. A radical rethink is now required to tackle the post-pandemic challenges.”

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