Over a million people plan to reduce pension contributions due to cost of living crisis

Younger people appear particularly likely to consider reducing pensions spend to make ends meet. Almost one in five 18–24-year-olds (18%) said they planned to reduce their contributions.

People have adapted to the cost-of-living crisis in a variety of ways, with many already opting to cut out everyday luxuries such as subscriptions (19%). A quarter (26%) of respondents admitted to dipping into savings to cope with price rises, and having to sacrifice long term financial ambitions. This is especially true of those aged 55+ (29%), and more true for women than men (28% vs 25%).

For those without savings, the situation is bleaker; almost one in ten people (9%) are increasing their use of credit cards, and 7% are paying more using ‘buy now, pay later’ schemes. The increase in credit card spending is true of 16% of 18–34-year-olds.

As the cost-of-living crisis continues, Barnett Waddingham’s research suggests it could push people to use funds earmarked for retirement planning to supplement increased costs too. 3% of those aged 55+ with a pension plan to draw down their pension to keep up with the rising cost of living.

Mark Futcher, head of DC at Barnett Waddingham, commented: “The cost-of-living crisis has forced many people to take a long hard look at our finances. But while there’s clear merit in doing some financial spring cleaning, cutting back on financial planning commitments could have a dramatic impact on long-term financial wellbeing.

“At a time of significant financial hardship, it’s important that employers do their bit to help employees keep their heads above water. At a basic level this means providing stronger financial guidance for employees and encouraging them to think twice before making knee jerk decisions with their finances. Better still would be to help valued employees shoulder the financial burden by upping employer contributions to workplace schemes and even considering continuing to pay employee contributions if an individual needs to pause contributions temporarily.“