A quarter of savers have slashed their contributions to occupational pensions thanks to the recession, according to pension consultant Punter Southall. Many have even suspended their contributions entirely.
Commenting on the results of their recent research, the firm claim that employees feel that they are too stretched by everyday expenses to maintain high levels of pension contributions. Lower wages combined with higher fuel, food and utility bills mean that month to month survival has become the priority of many households.
Whilst this is perfectly understandable, Punter Southall point out that pension savers need to weigh up the true cost of suspending or reducing their contributions. After all, not only will their pension funds be missing the value of the contributions themselves, but they will also lack any pension tax credit that the amount would have attracted.
But tax credits are not the only thing the schemes will miss out on. Many occupational schemes operate on the basis of employers matching their employees’ contributions. If the employees’ contributions are suspended or reduced, then their employers’ contributions may go down too.
Punter Southall fear that the pension pots of those who have taken the decision to stop or suspend their contributions may never recover. In gathering the information that formed the basis of the survey, Punter Southall consulted employers, rather than employees. Their research was conducted among 330 UK employers, including 24 of the FTSE 100 companies.
Whilst the employers that were asked felt that any new government in May would tweak pension policy, they were on the whole pessimistic about the effect any change would have on them or their employees. There was significant evidence that employers did not rate any of the parties’ pension policies, and a widespread expectation that their employees would not be better off under any new government.
It seems that no matter who forms the next government, and no matter what pension policies they bring into effect, it is the performance of the economy that will matter to individual savers’ pensions. Let’s hope that savers feel able to start up or increase their contributions before too long.