Almost one in 10 people (7 per cent) are planning to reduce workplace pension contributions as the cost of living crisis continues to escalate, according to research from Barnett Waddingham.
Inflation, and the rising costs of food, fuel and other essentials, is resulting in some 1.05mn people looking to cut back on their pensions, while the percentage of 18-34 year olds looking to make the adjustment is even higher, standing at 18 per cent.
Barnett Waddingham cited the latter as being of significant concern, as this is “a time when it’s vital to lay the foundations for a stable financial future”.
Although many people have already begun adapting to the crisis by cutting out luxury items, with 19 per cent dropping various subscriptions, the research reveals a significant impact on financial planning.
More than a quarter (26 per cent) have dipped into their savings to cope with rising prices, while many are having to sacrifice long-term financial ambitions.
This is especially true of those aged over 55 (29 per cent), and more true for women than men (28 per cent vs 25 per cent), the consultancy said.
Of those without savings to rely on, 9 per cent have increased their use of credit cards, rising to 16 per cent among the 18-34 age bracket, while 7 per cent are paying more in the long run from increased use of ‘buy now, pay later schemes’.
The research also suggested that people may increasingly begin to use funds earmarked for retirement to cope. Some 3 per cent of those aged over 55 plan to drawdown their pension to keep up with the rising cost of living.
Barnett Waddingham suggested this could have a “profound impact” on financial resilience, considering that most people are not saving enough into their pensions anyway.
It said companies should make sure they explain the level of contributions required to fund a comfortable retirement, but noted staff are reluctant to turn to their employers for help, with just 6 per cent saying they would ask for a pay rise, rising to 15 per cent of the 18-34 bracket.
Barnett Waddingham’s head of defined contribution Mark Futcher said: “The cost-of-living crisis has forced many people to take a long hard look at our finances. But while there’s clear merit in doing some financial spring cleaning, cutting back on financial planning commitments could have a dramatic impact on long-term financial well-being."
“At a time of significant financial hardship, it’s important that employers do their bit to help employees keep their heads above water,” he continued.
“At a basic level this means providing stronger financial guidance for employees and encouraging them to think twice before making knee jerk decisions with their finances.
“Better still would be to help valued employees shoulder the financial burden by upping employer contributions to workplace schemes, and even considering continuing to pay employee contributions if an individual needs to pause contributions temporarily."
Benjamin Mercer is senior reporter at Pensions Expert
