Cost of living crisis forcing millions to pull back on pensions

Young people need to keep saving to support their social mobility as they get older

Nearly five million people are considering withdrawing money from their pensions or cutting back on contributions, particularly the younger generation, as the cost of living continues to bite, according to Aviva.

That represents almost 23% of Brits with a pension. The insurer’s latest research shows that the figure rises to 42% of 16–24-year-olds and just under two-fifths (38%) of 25–34-year-olds who are likely to act to relieve their current financial situation.  There is also a distinct gender gap, with almost 3 in 10 (28 %) men planning to take one or more of these actions versus 18% of women.

Paying into a pension was important for younger people to improve their social mobility and close the wealth gaps in later life. Aviva urges people to weigh up the pros and cons and use the help and tools available.

Alistair McQueen, Head of Savings and Retirement at Aviva, says: “Pensions carry unique financial benefits that cannot be replicated elsewhere. For example, if you are in a workplace pension, it is very probable that your employer will be contributing too. If you stop saving, your employer will probably stop with you, and this boost will be lost. 

“Pension saving also benefits from tax relief. Stop saving, and tax relief will stop at the same time. It’s important to understand these other benefits when you are looking at your pension.

“Many modern pensions give you great control over how and when you save. For example, you can often stop, start, increase, or decrease the amount you save, as and when you want. And from the age of 55, there is great control over how and when you access your savings. The benefits of these simple flexibilities are more valuable than ever during these difficult times. However, it is important to consider all options and take advice if possible.”

Many people are facing tough choices, but there is information and help available, for example, through the government’s free and impartial guidance service, Pension Wise, or from a financial adviser. The majority of respondents (79%) who sought financial advice before withdrawing money from their pension pot or reducing their pension contributions agreed that it was extremely or somewhat helpful.

Free online tools are also available, like Aviva’s pension calculator, which can also help you work out how much you’ll need when you retire.

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