Workers cut back on pension saving to pay rising bills | Personal Finance | Finance

With real wages falling and debt rising sharply, people across the country are looking for ways to cut costs and supplement their incomes.

According to the Pensions Management Institute (PMI), over the past year, 20 percent of workers have left their workplace pension plans or asked to have their deductions reduced. Another 20 percent are considering doing so.

By leaving, and allowing for tax and national insurance, an employee on £20,000 will receive an extra £550 in rent, or £46 per month. High-wage workers can increase their take-home pay by increasing.

But they miss out on pension contributions from their employers, plus tax relief, so they have less money for retirement.

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A PMI poll of 2,000 workers found that 7 percent had left in the past 12 months and 13 percent asked for a smaller contribution.

Enrolled workers automatically have at least five per cent of their annual salary above £6,240 deducted, with employers adding on at least a further three per cent.

This month’s survey by Aviva found that 23 per cent of workers and pension funds are considering stopping, suspending or reducing their contributions.

Tim Middleton, head of policy and external affairs at PMI, told the Express they were “concerned”.

He said: “We would encourage those who are considering suspending or ending pension contributions to consider the impact on their retirement plans.”

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Employers are required to enroll new employees in the retirement plan immediately. To avoid it, employees must leave in a clear way and until recently, only 10 percent were doing so.

But the rising cost of living is putting growing pressure on struggling British families.

Ros Altmann, the former pensions minister, said: “It’s very important that people think clearly… you will lose money from your employer and taxpayer, this will be added to your pension. So you’ll be missing out on more than just your pension payments.

“I must say, however, that the pension company has not risen to the challenge of attracting people to continue paying. Your pension company has had a few years to help you see how big the pension age and how they can be useful for your future. I hope that the message will reach people.

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“The company is missing an opportunity to make people happy about their pensions. Once they provide that information, instead of relying on the media to do it for them, it will be better.”

●Most households’ living standards in 2023 will be as bad as this year, despite falling wages and higher energy, tax and mortgage costs, a think tank has warned.

Households are facing a “groundhog age” with the cost of living and disposable income shrinking further by 2022, according to the Resolution Foundation.



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