Hargreaves Lansdown survey finds one in seven workers have stopped pension contributions

A survey of 2,000 people carried out in May 2023 by investment firm Hargreaves Lansdown found that one in seven had stopped their pension contributions and 8% had cut them back¹. Three in 10 of those who had taken this action were aged 18 to 34, compared with two in 10 aged 35 to 54¹.

A separate survey of 2,004 people, also in May 2023, by financial planning firm Saltus found that one in five said they would have to cut pension contributions to cover rising mortgage costs¹. Which? also reported that its own consumer insight tracker found 1.3 million people had missed or defaulted on a household bill payment in the past month, and that 65% of those had failed to pay more than one¹.

Hargreaves Lansdown modelled the effect of a three year pause on a worker who starts saving into a pension at 22 on a salary of £28,000 and retires at 67¹. It estimated the pot would be worth £517,403, assuming an annual salary increase of 2%, investment growth of 5% and an annual pension contribution of 8%, made up of 5% from the worker and 3% from the employer¹. If the same worker paused contributions between the ages of 30 and 33, the sum already invested would continue to grow at 5% during that period, but the pot would be worth £470,114 at retirement, almost £50,000 less¹.

On the value of contributions, Which? reported that a basic rate taxpayer contributing £100 from salary into a pension would see it cost £80, with the government adding £20 in tax relief, and that stopping contributions can also mean losing the 3% employer contribution¹. On retirement income, its cost-of-retirement survey found a household of two needs at least £28,000 a year for a "comfortable" retirement including some luxuries such as European holidays and meals out, and that generating that income would need £115,000 to £131,000 in private pensions¹.

Helen Morrissey, pensions expert at Hargreaves Lansdown, said the most important thing if contributions are cut altogether is to resume them as soon as possible¹.

Why it matters for households

Someone over 22, in full time employment and earning more than £10,000 a year is likely to have been automatically enrolled into a workplace pension and to be paying at least 5% of salary into it, though there is no legal requirement to pay in¹. Stopping or reducing payments frees up money in the short term but reduces the amount invested and the tax relief added to it, and can mean forgoing the employer contribution¹. The Hargreaves Lansdown modelling puts the long run difference for one example worker at almost £50,000 at retirement¹. The survey evidence points to younger workers and those facing higher mortgage costs as the groups most likely to have reduced or stopped payments¹.

What happens next

Automatic enrolment means a worker who has opted out is re-enrolled every three years¹. Free, impartial guidance on pension options is available from the Money and Pensions Service, and those over 50 can book a free guidance session with a specialist¹.