Quarter of pension savers halt or cut contributions amid Covid-19

One in four people have either stopped or reduced their pension contributions in order to make ends meet since the onset of the Covid-19 crisis, according to research by Hargreaves Lansdown.

The firm found that a further 8 per cent of people plan to cut or reduce their contributions in the future, which would see the coronavirus pandemic hitting the pensions of around one in three people.

In particular, younger people were found to be worst impacted, with 32 per cent of those aged 18-34 stopping or reducing their pension payments since the start of the pandemic, compared to 16 per cent of over-55s.

Men were more likely to have shifted their pension payments amid the pandemic, with 29 per cent having already stopped or reduced contributions, compared to 20 per cent of women.

Hargreaves Lansdown personal finance analyst, Sarah Coles, explained that this may be as men and young people were "far more likely" to have been furloughed than women and older workers.

In addition to this, she also suggested that retirement may feel like more of a "distant consideration" for younger savers, and is therefore an easy cost to cut.

However, she emphasised that it is worth savers doing what they can now to keep paying into their pension, stressing that the money put in when you are younger "works the hardest for you".

She continued: "If you cut back, the impact will also be magnified, because you lose the government top-up too. If you’re paying into a workplace scheme, you’re triggering payments from your employer – so you’ll lose this free money into the bargain.

"The good news is that the way that automatic enrolment works should stop temporary pauses in payments becoming enormous gaps.

"If you opt out of a workplace pension, you will automatically be put back in after three years, so even if you don’t get round to kick-starting payments yourself, you’re likely to accidentally do the right thing.”

However, Royal London pension specialist, Helen Morrissey, warned that even a three-year break could risk damaging long term financial plans.

She added: “These figures echo research we carried out earlier in the pandemic which showed millennials were particularly badly hit.

“The concern is that once contributions are stopped or reduced the employee may forget to resume them.

“While they will be re-enrolled three years later they still risk damaging their long-term financial stability, particularly if this happens more than once in their career.”

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