One in ten cut pension contributions amid pandemic

One in ten (10 per cent) working age people with pensions have either reduced contributions or stopped saving altogether due to the coronavirus crisis, according to research from Scottish Widows.

A survey from the company found that self-employed workers were the group most affected, with 19 per cent having cut or completely halted contributions to their retirement savings, on top of the 41 per cent who were already not paying into a pension.

Workers between the ages of 18 and 24 were the next group most likely to cut payments, with 18 per cent having made the sacrifice, while 15 per cent of part-time workers and 11 per cent of female employees had taken the same steps.

Geographically, the most affected regions are the West Midlands and London, with 17 per cent and 16 per cent respectively having reduced or stopped their contributions.

The regions were the phenomenon had occurred the least were the South East and East Midlands, with just 6 per cent and 7 per cent respectively having made the changes.

Almost a fifth (19 per cent) of respondents said their income had decreased because of the pandemic, leaving 24 per cent worried about paying for essentials such as food and energy.

A further 20 per cent were concerned about being able to make rent or mortgage payments.

Scottish Widows head of policy, Pete Glancy, said: “The Covid-19 crisis has revealed a painful lack of financial resilience in the UK, leaving millions of people exposed with little or no safety net to fall back on. As the full impact of this crisis becomes clearer, more people may feel forced to pay for today’s essentials with tomorrow’s savings.

“However, this will only prolong the economic pain of coronavirus and could result in more people facing poverty in retirement.”

Citing the crisis, Scottish Widows called for the introduction of a single lifetime savings pot, which would be funded through an extension of automatic enrolment but with increased contribution levels.

The company said that modelling predicts that under these circumstances, savers could withdraw £1,000 up to three times during moments of financial crisis, or take out 50 per cent of their early savings for a deposit on their first home, and would still be better prepared for retirement than they are today.

Glancy commented: “Introducing a single lifetime savings pot would allow flexible access to savings during times of financial hardship. Not only would this have supported people struggling with the impact of coronavirus, but could also help crack the lifetime savings puzzle at the same as building longer term financial resilience.

“The next time that a crisis hits, more families could avoid being forced to choose between security today and protecting tomorrow.”

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