Pension contributions defy coronavirus

Despite economic hit to household finances, consumers are still prioritising their pensions.

Savvy savers are refusing to be thrown off course by the financial disruption of coronavirus, with most keeping up pension contributions despite knocks to household budgets.

Most adults with a pension continued to pay into it at the same rate as before Covid-19, despite more than four in ten being impacted by the pandemic, according to pension provider The People’s Pension.

Eight in 10 UK retirement savers do not appear to have made any changes to their pension.

Only 3% of those questioned who have a pension said they had stopped their contributions altogether during the past seven months, and 2% have reduced the amount they pay in since the March lockdown.

Just 2% said they had withdrawn money from their retirement savings – even though the country's economy has experienced its biggest slump since records began, and the recent rise in unemployment was the biggest in 11 years.

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The findings point to strong resolve among UK savers to stick to pre-Covid pension goals. That is all the more surprising given the same research found 15% of those surveyed had been furloughed at some point during 2020. Around 8% said their hours had been cut, and 5% have had to take a pay cut.

Commenting on the research, Helen Morrissey, pension specialist at Royal London, another pension provider, said: “As people face unprecedented uncertainty there the fear people will look to stop or cut contributions as a means of saving money, and that this can continue for long periods of time, which can undermine people’s long term financial security in retirement. 

“The results of this survey show that people are remaining calm which is the best possible news for their pension planning.”

The survey, undertaken in mid-October, also revealed some individuals have benefited from the forced savings brought about by the move to working from home, lockdowns, and limits on holidays. Around 2% of respondents said they had increased their pension contributions.

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One in seven said they have checked the value of their pensions savings in the past seven months. This could reflect a nervousness caused by volatility in stock markets over the last few months, which has pushed the FTSE 100 down almost 25% since January and has negatively affected many pension funds.

Phil Brown, director of policy at The People’s Pension, said: “This has been the most difficult year most of us can remember, with the fallout from the pandemic having an impact on almost everything that we do. 

“Despite the financial hardship that coronavirus has caused, this national survey confirms what our data has shown us throughout; that it has had very little impact on pension saving. Workplace pension saving through automatic enrolment has held up very well during 2020, confirming its status as one of the most successful Government policies of the 21st century.”

However the survey also revealed the pandemic had forced some to dramatically change their later life plans, with 1% delaying their retirement, and 1% retiring earlier than they had anticipated. That may reflect the struggle of older workers, hit hard by Covid-19 induced redundancies and unemployment, to find work again.