Cost of living crisis fuels enquiries on amending contributions

Cost of living crisis fuels enquiries on amending contributions

One in five of the pension schemes surveyed by the Pensions and Lifetime Savings Association have received enquiries from savers about reducing or stopping their pension contributions.

In a survey of 112 schemes, the PLSA also learned that 17 per cent of savers have sought early access to their pension after the age of 55. Just 28 per cent of schemes said that they had witnessed no changes to savers’ behaviour over the past few months.

In September, HM Revenue & Customs revealed that just over half a million savers withdrew money out of their pensions during the second quarter of 2022, doing so on average two or three times. 

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The amount taken out over the three month period was £3.57bn - up from £2.33bn in the first quarter - making it the highest quarterly figure since pension freedoms were introduced in 2015.  

However, only 12 per cent of schemes surveyed said that their members had expressed a desire to opt out, sitting just above the long-term average of 9 per cent. 

Nearly half of schemes (45 per cent) expect more savers to want to lower their pension contributions in the next six months, with 34 per cent anticipating members wanting early access to their pension after the age of 55.

Just over a third of PLSA members (35 per cent) have put ‘special measures’ in place to support their members, including signposting advice or guidance on managing debt and financial wellbeing. Schemes have also provided information on re-enrolment and transfers.

“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,” said PLSA director of policy and advocacy Nigel Peaple.

“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 six months.”

Alex Janiaud is deputy editor at Pensions Expert, FTAdviser's sister publication.