Pension providers have started to take action as more individuals move to reduce pension contributions as a result of the cost of living crisis.
Earlier this month, senior corporate pension specialist at Scottish Widows, Robert Cochran took to Twitter to reveal that the firm was filming some content for people who are looking to reduce contributions.
Speaking to FTAdviser, Cochran said: “We know that many people are worried about their financial wellbeing while others may be looking to make adjustments to their monthly outgoings to make ends meet.
“But before making any decisions, we urge people to consider the long-term implications of reducing pension contributions to help ease the current financial pressures. Paying in less now can have a big impact on the overall income when they come to retire.”
Cochran explained that it is not just about individual contributions as if someone is in a workplace pension scheme, their employer pays in too.
“Those who withdraw from workplace pension will miss out on these extra payments,” he said. “Some employees will be paying above minimum contributions to their schemes and may be able to reduce payments whilst keeping contributions above the auto-enrolment minimum – this will maintain a level of employer contribution.
“But it is likely to have a negative impact on the value of their pension pot over the long-term.”
He added: “With that in mind we strongly recommend people seek professional financial advice if they’re able to before making changes to their pension.”
Likewise, Canada Life said it has been talking about this through its own channels, mainly Linkedin.
Earlier this month, the provider released figures which showed through consumer research that one in 20 people have stopped their pension contributions because of the cost of living crunch.
This is happening across both the private and public sector.
The research revealed that a further 6 per cent of savers are actively thinking about pension pausing, while 9 per cent might consider doing so in the future.
This comes as inflation jumped to 10.1 per cent last week, after the UK saw prices rise by the steepest gradient in 40 years last month.
As concerns grow about the worsening cost of living crisis, households are feeling the squeeze on their personal finances.
According to Canada Life, opting out of a company pension for just one year could reduce the value of your final pot by 4 per cent, all other things being equal.
This is based on someone earning £50,000 a year, paying a contribution of 8 per cent and pausing contributions for a year.
Canada Life technical director Andrew Tully, said: “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.”