Yahoo Finance What pension research reveals about retirement planning
After years of unrelenting pressure on our finances, there are finally signs the cost of living crisis is starting to lift. Research carried out by Hargreaves Lansdown shows only 17% of people said they had stopped or cut back pension contributions over the past six months. This is down from well over a fifth of people (22%) who did the same thing this time last year.
There are also signs that people are looking to rebuild their pensions after these tough times, with 7% saying they had chosen to boost contributions over the past six months. A further 2% said they had hiked contributions after previously cutting back.
However, digging a bit deeper we see older people were far more likely to cut back, with one quarter of the over 55s saying they had done so. This compares to just 11% of the 18-34s. This could be due to an early exit from work due to long term sickness for example. The most recent labour market data shows economic inactivity in the latest quarter being driven by older workers leaving the workplace.
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If they already have a decent amount saved for retirement, then this might be ok, but if they still have gaps to fill in their planning then this group has far less time to fill them. These results are also borne out in the most recent Hargreaves Lansdown savings and resilience barometer which shows just 40% of older households are on track for a moderate retirement income compared to 43% of Generation X households.
If you have had to take the difficult decision to cut back, or even stop pension contributions in recent years, then it’s important not to panic. Our budgets have taken a pounding as inflation has soared, leaving many needing to make tough financial decisions. If you’ve stopped your contributions completely, then under auto-enrolment, you will be re-enrolled every three years, but ideally you don’t want to stop contributing for that length of time. Make a note to revisit your decision every six months, because restarting as soon as possible will help you make up any gaps more quickly.
Read more: What is the true cost of the UK state pension?
On an ongoing basis, there are small but important steps you can take to boost your contributions. Increasing them every time you get a new job or pay increase is one way of hiking how much goes in without being too painful. You may also find that your employer is willing to put more into your pension if you do. This is a process known as the employer match and can mean a lot more goes into your pension overall without much extra necessarily needing to come from you. If it’s available to you it’s a great way of rebuilding your pension after a difficult time.
Helen Morrissey is head of retirement analysis at Hargreaves Lansdown
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