One in seven (14%) high-net worth individuals, those with assets of £250,000 or more, have reduced their pension contributions within the past six months, whilst a further 14% plan to in the next six months, research from Saltus has revealed.

The survey also suggested that high-net worth individuals are more likely to have recently cut their pension contributions, as this compared with only 9% of savers who have already reduced their contributions across the population as a whole.

According to the survey, those higher net worth individuals who already have cut their pension payments, or plan to, have done so by an average of £1,246 a month, a reduction of almost £15,000 a year.

Saltus attributed the cuts in pension contributions to the growing financial pressure that many are facing amid the cost-of-living crisis, revealing that the majority (84%) of high-net worth individuals are already experiencing or expecting a hefty increase in their mortgage rates to put a strain on their cash flow.

However, Saltus warned that the vast majority of high-net worth individuals are underestimating what they will need in their pension for a comfortable retirement.

Indeed, whilst the survey found that respondents expected to need, on average, a pension pot of £578,313 for a comfortable retirement, in reality, they are more likely to need almost £700,000 plus the full state pension, for which 30% don’t think they will qualify.

Commenting on the findings, Saltus partner Mike Stimpson stated: “The fact that many high-net worth individuals are cutting their contributions to help cover their mortgage repayments in the short-term means their already too small pension pots could be at further risk.

“For a comfortable retirement, it is estimated that a single person needs £37,300 a year, and to achieve that you’d need a pension pot of £932,500.

"Even with the full state pension – which will be £10,600 in FY23/24– you’d still need almost £700,000 in your pension to make up the shortfall. So, most HNWIs are underestimating what they’ll need by more than £120,000.

“Pensions are one of the most phenomenal vehicles for growing your money. If you’re a higher-rate taxpayer, the potential tax saving is equivalent to a 72% return just by putting the money into a pension. So, cutting contributions should be a last resort.”

Despite the concerns, the research revealed that some high-net-worth individuals are bucking the trend, with nearly a fifth (18%) intending to start contributing more.

Given this, Saltus also said that the government’s recently announced plans to abolish the lifetime allowance (LTA) altogether from April 2023 could also be a silver lining.

In particular, it suggested that the change will be “welcome news” to the vast majority of HNWIs who may have underestimated the size of their pension pot needs, with many now likely to be reconsidering how much they could top up their pensions by in the years to come.

“Another benefit of the LTA changes is that you can also backdate pension contributions by up to three previous years, including the year you’re in, meaning pension holders that had already reached the LTA could potentially be looking to invest up to £180,000 into their pensions in the next few months," Stimpson noted.

“However, we would urge people to be mindful that these rules could change again in the future and be sure to also consider other wrappers to maximise tax efficiency to help pave the way for a comfortable retirement.”

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