Warning as pension payments drop
One in five people are planning to stop or reduce pension contributions during the next two years in a bid to save money, a new survey has suggested.
A poll for insurance giant Axa which questioned 2,034 people online between 30 October and 6 November found about half were cutting pension payments to offset food and fuel price increases, or to clear debts. Axa warns that such a "pension holiday" may have an impact on quality of life during retirement.
The past year has seen rises in food and energy bills, putting household budgets under pressure and the credit crunch has caused lenders to raise their mortgage rates, giving many a shock when their current deal has finished.
The Axa survey showed 13% said they were planning to stop or reduce pension contributions because of bigger mortgage payments and 4% said they were going to reduce their current level of pension contribution or money paid into a retirement pot. Another 4% said they were to stop paying into a pension or retirement pot, with the intention of not restarting payments.
Axa estimated 1.5m people will take a pension contribution holiday, collectively reducing the final value of their retirement funds by nearly £35m and people aged between 35 and 44 were the most likely to be planning to cut back on contributions.
The BBC's personal finance reporter Richard Scott said there were concerns that many people were not saving enough for a comfortable retirement anyway, and cutting pension contributions further could make that situation worse.
Steve Folkard, head of pensions and savings policy at AXA, said: "Taking a pension break should be a last resort because of the long-term repercussions.
"If you put £300 a month less into your pension for two years you will have a pension pot that is tens of thousands of pounds short when you retire."