Millions put pensions on hold to pay their bills amid rising fuel and food prices

Millions of people have given up saving in pensions in the past year to receive an extra £550 or more in annual take-home pay to meet rising fuel and food bills.

The Pension Management Institute has found that the sudden change in attitudes has left employees typically hoping to delay their retirement plans by three years.

According to its research, 20 per cent of workers have opted out of workplace pension schemes or asked to reduce their pension deductions in the past year. Another 20 percent are considering doing the same.

Low-paid workers at £20,000 a year can increase their take-home pay by around £550 by opting out, but they miss out on their employer’s parallel contribution and tax relief, so retirement There is less to put away. Employees on higher salaries can increase their take-home pay further.

The chase for cash to pay the bills could jeopardize the automatic enrollment campaign, a venture with cross-party support that encourages people to save for their old age.

Sarah Cook, chair of the Pensions Management Institute, said: “It is sad that all the good that has been achieved by automatic enrollment over the last decade may be forced by desperate people to make short-term decisions at the cost of their long-term security.”

Under automatic enrollment rules introduced in 2012, employers are required to automatically place new recruits into a pension plan of minimum standards. To avoid this, employees must explicitly opt out. The plan has been considered a huge success, encouraging more than 11 million people into retirement savings for the first time. Until recently, only 10 percent of the workforce was exiting.

PMI’s survey of 2,000 employees found that 7 percent had opted out in the past 12 months and 13 percent were asked to contribute less, meaning in many cases they missed out on parallel contributions from their employer. went.

Automatically enrolled employees have at least 5 per cent of their annual salary over £6,240, with employers taking a 3 per cent deduction. By opting out, and allowing for extra tax and National Insurance, a worker on £20,000 would get an extra £550 in take-home pay, or £46 a month.

Cook said he expected the number of people opting out or making smaller contributions to rise “probably sharply” as people grappled with Christmas costs and a reduction in energy price subsidies from April.

“Our research shows that a significant proportion of the general public are saving at rates that are lower than they were 12 months ago,” she said. “They are aware of its impact, but feel they have no choice.”

Under the rules, employees who opt out are re-enrolled after three years and have to opt out again if they wish. The aim is to use inertia and “economics” to encourage more pension savings.

Research this month by Aviva found that 23 per cent of workers were considering stopping, stopping or reducing their contributions to pension funds.

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