Last week, the pensions minister Guy Opperman confirmed 12 million people in the UK are not sufficiently saving for retirement in a written response to MPs. However, this figure was based on analysis based in 2017 and opposition politicians are asking the Government to provide an updated figure on the future of pensions in the UK. Experts believe people are choosing to forgo making pension payments due to the growing cost of living crisis which has seen inflation and energy bills skyrocket.
Currently, inflation in the UK is at 10.1 percent and energy bills are due to rise to, and be capped at, £2,500 next month.
With the increase in price of essential utilities, goods and services, many people are looking for ways to save money in the short-term.
One of the options people are turning to is stopping payments to their workplace pensions and other savings accounts.
This is being done so people have more money in their pockets in the short-term, however experts believe this is detrimental to people in the long-term once they reach retirement age.
Workers in the UK do not have to remain a member of their pension scheme and are allowed to stop paying contributions at any time.
It should be noted that if a worker chooses to do this, their employer will stop making pension contributions on their behalf also.
Due to the cost of living crisis impacting the interest rates of savings accounts, Britons are opting to temporarily stop putting their money with banks and building societies.
With inflation forecast to reach 18 percent within the next year, recent analysis suggests halting pension and saving payments for retirement is slowly becoming the norm.
New research carried out by Nerdwallet found that around 46 percent of Britons have reduced or stopped payments into their pensions, investments or savings over the past 12 months.
Some 43 percent of people polled by the financial comparison website said they were viewing their finances through a short-term lens, with experts citing the cost of living crisis as to why this is happening.
Richard Eagling, a pensions expert at NerdWallet, explained: “The cost of living crisis is having a negative impact on individuals and families right now, curtailing their ability to save, invest or contribute to their pension.
“People are having to take these more severe measures to plug the financial gaps they face, decisions which will sadly have a negative impact on their long-term finances if they are unable to reverse them soon.”
Surprisingly, 13 percent of Britons surveyed admitted they did not have any kind of savings, investments or pension at all.
Mr Ealing added: “Saving for the future is something we all need to do – especially with the state pension age set to rise.
“It is important that individuals understand the potential impact of reducing or stopping their savings, investments or pensions and how this could hamper their attempts to reach their life goals such as a comfortable retirement.
“In particular, those who are looking to cut their pension contributions should not overlook some of the key benefits that a private pension can provide such as tax relief and employer contributions.”
Notably, research conducted by WEALTH at work highlighted that young people are most likely to forgo making pension payments in light of the cost of living crisis.
Around 32 percent of 18 to 34 year olds know they should be saving more for their retirement but only 16 percent believe their savings are on track for a “comfortable retirement”.
Jonathan Watts-Lay, the director of WEALTH at work, said: “It’s very concerning that young people are having to reduce or completely stop their saving in an attempt to free up money to pay for ever increasing bills.
“Whilst it is completely understandable, it is also important to recognise that stopping saving now could have a dramatic impact on their future, and something they regret later in life. It is important to still save what they can.”