Pensions reboot: three in five restart contributions after pandemic knocked back payments

This includes more than one in ten (12%) who have restarted contributions after stopping them during the pandemic.

Last year research from Royal London, the mutual life and pensions provider, found that one in five (19%) of those who contributed to a pension either reduced (11%) or stopped (8%) payments, with millennials being the most likely to do so (40%).

Now, most of those who reduced or stopped their contributions have since restarted them.

Men are more likely to think they are paying enough into their pension for retirement than women (84% vs 71%) and are also more likely to have restarted their contributions after stopping or reducing them (66% vs 47%).

The average current pension contribution (excluding employer contributions) among those who had restarted or increased their payments was 4.9% of their salary.

One in six (15%) still think they are not paying enough into a pension for their retirement. Nearly half (47%) think they are paying enough but still need to increase their contributions, and a third (33%) think their contributions are adequate.

Research showed that the older the participant, the less likely they are to have restarted their contributions after stopping or reducing them. Three in four (77%) of those aged 18-34 have since increased or restarted contributions compared to those aged 35-54 (51%) and 55+ (9%).

Sarah Pennells, consumer finance specialist at Royal London, said:

“There’s no doubt the pandemic caused people to rethink their financial priorities and last year we saw pension contributions facing a knockback. It’s great to see that people are rethinking their retirement priorities by increasing their pension payments.

“Although some people still think they’re not paying enough into their pension, it’s still encouraging to see some return to normal.  However, it’s worrying that less than half of women half restarted their pension contributions, compared to over two thirds of men. We know that women retire on a lower income than men in retirement, so it’s vital they set aside money so they can have a good standard of living in retirement. Any contribution you can make to your pension is better than none, especially if your employer can match it.”

 Top tips on how to pay more into your pension:

1. If you’re in a workplace pension, check if you can pay more than the default contribution rate and whether your employer will match your contributions. If you can’t increase your pension contributions before Christmas, set a reminder in your diary to revisit your budget once Christmas bills are out of the way.
2. If you receive a bonus at work, you can exchange some or all of it for a contribution to your pension. You save tax and National Insurance on any bonus that you exchange.
3. If you’re self employed and you have your own pension, you may find it easier to pay in lump sums rather than monthly payments, if your income fluctuates. You miss out on employer contributions, but you still get tax relief.

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