Investec Survey Reveals Pensions Scheme Scepticism

All that lovely free money in the form of Furlough pay has consequences its seems; some people no longer see a value in setting aside cash for their old age, instead they expect the State to cough up. Then there’s the cost of  living in the here and now, which has eaten into savings and disposable income. Perhaps a State benefits/pension scheme is the only realistic option long term for the majority of the population on sub 50K wages?

Here’s the word from Investec who have found a trend towards cutting back on pension contributions.

Nearly two out of five pension investors have stopped contributions or cut back on payments in the past five years with nearly a third admitting the decision will delay retirement plans, new research from wealth manager Investec Wealth & Investment (UK) shows. The nationwide study found one in four (25%) have stopped paying into their pensions while another 12% have dramatically or slightly reduced monthly contributions. The average amount of reductions lost contributions adds up to nearly £900 a year.

Nearly half (49%) questioned in the study by Investec Wealth & Investment (UK), part of Rathbones Group, do not plan to restart or increase contributions and around a third (30%) admit the decision will have an impact on their retirement date.

SOME SEE A VALUE IN PENSION SCHEMES, DESPITE INFLATION

It’s not all bad news on pension contributions – around 11% say they have increased the amount they pay into their pension each month and around one in 12 (8%) have cut back on contributions into their fund for tax reasons such as exceeding the annual allowance or reaching the lifetime allowance. More than a quarter (26%) who have stopped or reduced contributions plan to restart within a year with 11% aiming to do so within six months.

But pension investors admit stopping or reducing contributions will affect their retirement date – around 30% say they will delay when they retire a result with 6% saying they will not be able to retire at all.

The cost of living crisis is a major reason for cutting or stopping contributions cited by 25% but 26% say moving jobs or suffering a pay cut meant they stopped or reduced contributions while 13% blamed the impact of the COVID-19 crisis.

Faye Church, chartered senior financial planner at Investec Wealth & Investment, said: “Saving as much as possible into your pension for as long as possible is the best way to maximise your retirement income. Stopping or reducing contributions will clearly have a major impact, however, contributing a small amount is better than contributing nothing at all.

“That is demonstrated by the research which shows that people who have stopped or cut contributions have admitted that it has delayed their retirement plans with some even saying they cannot afford to retire as a result. However, those closer to retirement who now cannot afford to retire, may have been able to to if they had sought advice earlier in their years.”