Millennials risk losing nearly £6,600 by pausing pension contributions

People pausing their pension contributions in their 20s and 30s could stand to lose almost £6,600 by the time they reach retirement age, analysis from Money Minder has revealed.

The research found that those in their 20s that paused pension payments for a year could have an additional £1,371, they risked losing up to £5,770 from their total pension fund when they reach state pension age, due to the accumulation of the investment returns contributing to the growth of the fund over the long term.

Those in their 30s on a higher salary saved more than their younger counterparts (£1,885 a year), but the research revealed that they could stand to lose £6,598 by the time they reach state pension age.

These figures were contrasted by Money Minder with how pausing contributions affected older savers, revealing that those in their 50s, contributing an average of £1,988 per year, risked a shortfall of £3,976 when they reach state pension age.

These findings were revealed in conjunction with Money Minder’s revelation that there had been a 400 per cent increase in people search for “pension pausing contributions” in the UK and a 467 per cent in people searching “should I stop paying into my pension”.

Money Minder managing director, Ray Black, commented: “While it may seem like a good idea at the time, pausing your pension contributions or withdrawing money from your pot when you reach age 55 or before your state pension starts is likely to substantially reduce the value of your money, either immediately, later on in life, or perhaps even both.

“I often find myself saying to clients: ‘just because you can do something, it doesn’t mean that you should.’

“The cost-of-living crisis has exacerbated some people’s financial situations, and if you do feel like you have little choice but to suspend your pension contributions, it’s important to start them again as soon as you are able to.

“It’s also crucial to seek independent financial advice no matter what your circumstances are, to avoid making an inappropriate decision instead of an informed one.”

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