Whilst many are struggling to meet their financial commitments due to the cost-of-living crisis, and are spending and saving less to make ends meet, very few have stopped or reduced their pension contributions, data from the Financial Conduct Authority (FCA) has revealed.

The watchdog’s latest cost-of-living survey found that, despite the continued financial strain, there have been some improvements, as the number of people struggling to pay bills and credit repayments fell from 10.9 million in January 2023 to 7.4 million in January 2024.

However, this is still higher than the 5.8 million recorded in February 2020, before the cost-of-living squeeze began.

And this financial strain is impacting consumer behaviour, as the FCA found that, in the 12 months to January 2024, 77 per cent, or around 40.5 million adults, spent less or worked more to make ends meet, although fewer reported this than did so for the 6 months to January 2023 (89 per cent).

In particular, the FCA found that 52 per cent, or around 27.5 million individuals, had cut back on the amount of electricity, gas or other heating fuel used to save money, while 48 per cent had cut back on their food shopping to save money.

In addition to this, nearly half (44 per cent) of savers have stopped or reduced saving or investing to make ends meet, while 23 per cent had opted to use their savings or investments to cover day-to-day expenses.

In contrast, just 3 per cent of adults, around 1.8 million people, stopped contributing to a pension or reduced their contributions to make ends meet, and only 2 per cent, around 1.1 million savers, cashed in a pension or took out a lump sum to cover day-to-day expenses.

AJ Bell director of public policy, Tom Selby, said that it is "encouraging" that the vast majority of savers have chosen to keep saving for retirement, particularly "in the face of such a brutal cost-of-living crisis", suggesting that tax relief, tax-free investment growth and the potential for employer contributions have all helped encourage people to stick with pension saving.

"Having seemingly passed this huge test, the next big challenge for the government’s flagship automatic enrolment reforms will be scaling up contributions in a way that doesn’t result in a surge in opt-outs," he continued.

“The FCA’s survey findings are also encouraging for people at the other end of their retirement saving journey, with just 2 per cent either cashing in their pension fully or taking out a lump sum to cover day-to-day expenses.

“While raiding your pension early might be tempting as living costs rise, taking out too much, too soon from your pot could risk you running out of money in later life and land you with a fat income tax bill to boot."

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