Pensions - Articles - Mind the gap as cost of living creates pension pausers

 With inflation rocketing skywards, and households feeling the squeeze on their personal finances, worrying research1 from Canada Life has identified many people are cutting back by pausing their pension contributions. One in twenty adults (5%) have said they have already stopped their contribution into their company pension scheme. A further 6% of savers say they are actively thinking about pension pausing, while a further 9% might consider doing so in the future.

 Opting out of a company pension for just one year could reduce the value of your final pot by 4%, all other things being equal, according to the number crunchers at Canada Life2. This is based on someone earning £50,000 a year, paying a contribution of 8% and pausing contributions for a year.

 Andrew Tully, Technical Director at Canada Life commented: “The rising cost of living crisis is putting an incredible amount of strain on people’s finances. With economists expecting inflation to peak into double digits later this year, the squeeze on the nation’s finances will only get worse.

 “It’s understandable that people who are really feeling the pinch are considering opting out of their pension. Affording food and heating in the present day will always take priority over saving for the future. However, it’s important that anyone who does decide to opt out of their pension remembers that they can choose to re-join the scheme as their financial situation improves.

 “It’s worth remembering if you are in a company pension scheme you can often only choose to stop or start contributions once a year, and you will miss out on valuable top ups from your employer and the government.”