Consumers in the UK are more likely to increase their pension contributions rather than reduce them, due to improving savings rates as a result of continued rate rises by the Bank of England (BofE), the latest findings from GlobalData have revealed.

As reported by our sister title, MoneyAge, GlobalData’s 2023 UK Life and Pensions survey found that 18.2 per cent of consumers increased their pension contributions in the 12 months to May 2023, with just 3.3 per cent reducing them.

The survey of 3,000 people in Q2 2023 found that 32 per cent of those earning more than £50,000 per year increased their contribution more than the overall proportion of consumers who earn under that amount.

Additionally, 42.9 per cent of the 3.3 per cent of consumers who reduced their contributions were in the £16,000-29,999 per year wage bracket.

The BoE raised the central bank rate for the thirteenth successive time to 5 per cent in June 2023, which translates to more attractive rates for savings accounts and pension funds.

According to GlobalData, people who can afford to spare any money have been utilising the improved rates pension funds have been offering.

GlobalData senior insurance analyst, Ben Carey-Smith, said: “It might have been expected that people would have reduced their contributions in a bid to cut household bills during the cost-of-living crisis driven by high inflation.

"However, for those who can afford it, over the last 12 months, savings rates have been at their most appealing levels in a decade.

“Yet, it is not all good news for savers, as the central bank rate remains considerably lower than the latest inflation figure of 8.7 per cent. Therefore, even if their pension pots are growing, savers are losing money at current prices.

"Furthermore, pensions are not simply savings accounts, and some funds will be pushed towards more risky investments by inflation levels.

“As the saving environment continues to improve and inflation is expected to fall later in 2023, pension funds should continue to see increases in contributions from wealthier clients.”

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