One in five pension scheme members may reduce or halt their contributions to cope with the cost of living crisis, according to a new survey by a leading pension trade body.
The Pensions and Lifetime Savings Association says that one in five pension schemes it surveyed in September reported savers asking about reducing or stopping their pension contributions.
The ‘voice’ of the pensions industry trade body, which represents most major UK pension schemes, says its survey has highlighted the “first signs” that a cost-of-living crisis in pensions is beginning to emerge.
It surveyed 112 pension schemes and found that:
• 1 in 5 pension scheme members have asked about reducing or stopping their pension contributions (19%)
• 1 in 5 want early access to their pension after age 55 (17%)
• Only 1 in 4 schemes have seen no changes in saver behaviour over the past few months (28%)
On the more positive side, the PLSA says that only one in 10 schemes surveyed have seen members wanting to opt out (12%), only slightly above the long-term trend of 9%.
As pension savers have grown more anxious about the cost of living crisis, one in five schemes have also seen an increase in members seeking help and guidance on financial management (19%).
Almost half of pension schemes (45%) expect more savers might want to reduce pension contributions in the next six months and one in three expect members to want to have early access to their pension after age 55 (34%).
The PLSA’s survey found that around a third (35%) of PLSA members have put special measures in place to support members during the cost-of-living crisis, with more than a quarter (28%) planning to do so or provide additional measures.
The main measure that has already been put in place for members is signposting advice or guidance on managing debt and financial wellbeing (68%). Over half have signposted information on pension planning (55%) and circulated information about the risk of pension scams (52%).
Around a third have signposted information on automatic enrolment, including that the employee can opt out and will be automatically re-enrolled after a period of time (36%), and three in 10 have signposted support/guidance on transfers (29%).
The PLSA has warned savers that reducing or pausing pension contributions or – for over-55s dipping into their pot to cover short-term expenses – could have a significant impact on future retirement income.
The PLSA will be producing for its member pension schemes best practice guidance on communicating issues on the cost of living in the coming weeks.
Nigel Peaple, director of policy & advocacy, PLSA, said: “As the cost-of-living crisis continues to pose challenges for many people up and down the country, we are seeing the first signs of this manifesting itself regarding workplace pensions.
“Our survey shows opt-out rates remain low and that most people are choosing to maintain their pension contributions with the related benefits from employer contributions and tax relief.
“However, the cost-of-living crisis will affect each household differently, so it is not surprising that some people have been asking about accessing their pension early, once they are over 55 years of age, and that schemes believe some savers will reduce their pension contributions over the next 6 months.
• Research was conducted by the PLSA from 5 Sept to 16 Sept with responses from 112 pension schemes ranging in size from schemes with AUM from under £30m to over £3bn.
