One in 10 workers cut pension contributions amid COVID-19

Around one in 10 adults reduced their pension contributions amid the pandemic, whilst 6% stopped them altogether, according to industry research.

The research, from the Pensions Policy Institute (PPI) and Capita, found that women and people aged 18-24 and 55 and over most likely to halt contributions altogether.

It also revealed that 6% of people aged over 50 retired early as a result of the pandemic, whilst 9% delayed retirement.

It acknowledged, however, that changes to contribution levels had remained "relatively low considering the financial pressures of COVID-19", with 20 million adults in the UK, 38% of the population, having seen their financial situation worsen amid COVID-19.

Younger people and those from a Black, Asian and ethnic minority (BAME) background were hardest hit amid the pandemic, according to the report, with 20% of 18-24-year olds working in February 2020 out of work by January 2021, compared with 7% for workers of all ages.

Furthermore, more than half (57%) of people aged 18-24 used some form of debt between March and September 2020, compared to just 20% aged 50 and over, whilst a further 20% of young people were behind on their bills.

The report also found that around 50% of Bangladeshi and 35% of Pakistani men worked in shut-down sectors such as restaurants and taxi driving, with this time out of work likely to result in fewer contributions both now, and potentially in the future.

Commenting on the findings, PPI head of policy research, Daniela Silcock, said: “It is hugely concerning to see the disproportionate impact that the pandemic has had.

"With the growth of the gig economy and the more transient nature of careers, there is a risk that people will become even more disengaged from their retirement savings pot.

“Given the complexity of decisions, particularly since the introduction of the pension freedoms, many people will find it difficult to make choices that will best meet their health and care needs over the course of later life.”

Capita Pensions managing director, Stuart Heatley, added: “COVID-19 has clearly exacerbated issues around gender and racial social disparities and periods of unemployment, but let’s be honest, these trends have been around for some time now and it really is time we address them.

“The simple fact is that saving for the future will always seem pointless if today is a financial struggle month to month.

“Advice plays an important role in supporting people while making critical choices about their future, but most of this guidance currently focuses on at-age retirement decisions rather than supporting ongoing discussions throughout an individual’s career.

“It is clear that with less job certainty, a rise in the gig economy and expectations of multiple roles (some simultaneously) the current pension system is outdated and no longer reflects the needs of an aging population and society.”

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