47% of those nearing retirement have reduced pension payments

People in their 50s traditionally increase pension payments as retirement approaches, in order to maximize their pensions pots. But the survey suggests that the trend has been reversed.

The survey of UK adults aged over 55, who have a personal pension, more than a fifth (22%) have stopped making pension contributions altogether and a quarter (25%) have decreased the amount they pay into their pensions every month. Only 13% have increased their pension contributions.

The survey also revealed that almost two thirds (65%) of those scaling back or stopping their pension contributions altogether said they could not afford to make monthly payments, citing increased living costs as one of the main reasons why. One in 10 said they were foregoing pension savings to give money to their family instead. A quarter (25%) said they didn’t feel the returns on pensions are good enough.

Pressure among 50-somethings to be the 'Bank of Mum and Dad' by lending a financial hand to their children, together with stubbornly high rates of inflation are both likely to have contributed to many people’s decision to slash their pension contributions.

Yet those doing so were under no illusions about the impact this will have on their retirement. More than three-quarters (76%) said they believed they would have a pension shortfall. And almost eight in 10 respondents (79%) who said they would have a pension shortfall said they had no plans in place to cover it.

Steve Wilkie, managing director, Responsible Equity Release, comments:

“For many of us the imminent approach of retirement concentrates the mind – and we start thinking harder about our pensions.

“So it is surprising and worrying that so many people in this position are cutting back or stopping their pension contributions. Many are deliberately closing their ears to the ticking pension time bomb, and accepting that their pension income may not be enough to live on comfortably.

“In an era when annuity rates have collapsed and inflation is eating away at the value of pensioners’ savings, we all know we should be saving more, not less, into our pensions.

“But at least those who feel they cannot do so have other options. With house values on the rise once again, we are likely to see many more of us using equity release to unlock the value of our homes in retirement.”