Saltus survey finds one in five would cut pension contributions to cover mortgage costs

A survey of 2,004 people carried out 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. A separate survey of 2,000 people in the same month by investment firm Hargreaves Lansdown found that one in seven had stopped their contributions and 8% had cut them back¹. Three in 10 workers who had taken this action were aged 18 to 34, compared with two in 10 aged 35 to 54¹.

The figures sit alongside wider evidence of household budget pressure. Which?'s consumer insight tracker found that 1.3 million people missed or defaulted on a household bill payment in the past month, and 65% of those failed to pay more than one¹.

Hargreaves Lansdown modelled the effect of a three year pause on contributions. For a worker who starts saving into a pension aged 22 on a salary of £28,000 and retires at 67, it estimated a pot worth £517,403, assuming an annual salary increase of 2%, investment growth of 5% and an annual pension contribution of 8% (5% from the worker and 3% from the employer)¹. 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.

Source: Hargreaves Lansdown modelling reported by Which?¹

On what is given up, Which? set out the mechanics of pension tax relief: a basic-rate taxpayer contributing £100 from salary into a pension pays £80, with the government adding £20, the amount it would have taken in tax from £100 of salary¹. Cutting contributions can also mean losing the 3% employer contribution¹. On retirement income, Which?'s 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 estimated that generating that income requires £115,000 to £131,000 in private pensions¹.

Helen Morrissey, pensions expert at Hargreaves Lansdown, said the priority for anyone who does stop contributing is to restart as soon as possible¹.

Why it matters for households

Workers over 22 in full-time employment earning more than £10,000 a year are likely to have been automatically enrolled into a workplace pension and to be paying at least 5% of salary into it¹. Contributions are not legally required, so reducing or stopping them is a choice available to those enrolled¹. The immediate effect is more money in the monthly budget; the deferred effect is a smaller pot at retirement, as the Hargreaves Lansdown modelling illustrates¹. Because employer contributions are tied to employee contributions, cutting back can also reduce the amount paid in by an employer¹. Auto-enrolment means a worker who opts out is re-enrolled every three years¹. Anyone weighing up what a pot might need to produce can read our guide to how much you need to retire, and the pensions hub covers the wider system. Free, impartial guidance is available from the Money and Pensions Service, and those over 50 can book a free guidance session with a specialist¹; our page on the Pension Wise service explains how that works. For anyone considering changing mortgage terms instead, the mortgages hub and our guide to mortgage terms and extensions set out the options.

What happens next

No further dates have been reported. The Saltus and Hargreaves Lansdown surveys were both carried out in May 2023 and reported by Which? on 14 September 2023¹.