When asked how they would manage their finances this month, the majority of people (59%) said they’d cut back on discretionary spending such as going out, holidays and subscriptions. However, almost one in three (30%) admitted they’re also trimming back on longer-term savings too.
This fiscal belt tightening is impacting pensions. Over half (51%) of people have either considered or already reduced or paused their pension contributions in the past year. Worryingly, if they had to pause contributions, nearly a quarter (24%) said they wouldn’t be able to get back on track with their retirement savings at all.
This is having a knock-on effect on retirement confidence: just one in 10 (11%) feel very confident they’ll be able to afford a comfortable retirement, while more than half (53%) stated they were either not very, or not at all confident.
Lisa Picardo, Chief Business Officer UK at PensionBee, commented: “When bills are rising, it’s understandable that long-term saving can feel like a luxury, so it’s encouraging to see that savers’ first instinct is to cut back on non-essentials. But for too many, their retirement savings are still at risk as they weigh up sacrificing their future financial security to cover today’s costs. Pausing pension contributions should always be a last resort, as missed contributions can add up to a huge difference in your retirement income. If you are forced to pause them, try to reinstate them and make up the difference later in the same year, when cash flow allows.
“If we want a more resilient financial system that can withstand cost of living crises, then systemic change is needed. Gender-inclusive parental leave and accessible, funded childcare, for example, would help create more equal earning potential and retirement security for women. Lowering the Auto-Enrolment age threshold would be a simple step to allow everyone earning to take advantage of the magic of compound growth in retirement savings. And introducing faster, electronic pension transfers would empower consumers to more effectively take control of their retirement. We cannot allow today's contribution gaps to become tomorrow's retirement poverty."
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