Life and pensions provider LV=’s recent survey has found pensions contributions have fallen by £11 billion over the last twelve months, fuelling fears of a contributions exodus.
The research found that Britons, who are due to retire or have already retired, have reduced their contributions by £342 each month on an average.
People with public sector pensions have cut contributions by £321 on an average every month over the last 12 months, compared to £434 made by people with private sector pensions. This resulted in £11 billion of ‘lost’ pension savings, the report observed.
“A significant number are still cutting back on what they save each month and by a greater sum as time goes by. It also appears that the government may have misjudged the public mood by shelving plans for early access, which may indeed have provided a welcome stimulus for wider pension saving”, said Ray Chinn, head of pensions at LV=.
The latest findings come after it was reported earlier that one in five over 50s, who don’t wish to work beyond the age of 65, may be forced to do so due to lack of adequate pension pots. One third in the same group is under increased pressure since their children are still seeking financial support.
Many in the over 50 age group are ignorant about certain issues after the government announced pensions reforms recently. A further 75 percent are unaware that the government has done away with the requirement of buying an annuity at the age of 75 years and another 25 percent don’t know that the government will replace the current pension credits with flat rate state pensions by 2015.
Only 9 percent of respondents opposed a flat rate state pension while an overwhelming 63 percent chose it over pension credits. Another 48 percent approves the proposal of allowing people to access their pension pots early.
“In the current economic climate people will look to reduce their spending, confronted with an inflation rate of 4.5 per cent and with little evidence of any early significant improvement”, said Blair Cann of M Thurlow & Co.
“For ordinary members of the public savings activities, be they pension contributions or other forms of savings, will often be the first port of call for reducing expenditure. This is not necessarily because they are considered unimportant but because any reductions now can theoretically be made up later since most savings contracts are longer term”, he added.