Pension: Retirements facing ‘pressure’ as contributions drop and families are supported

Pension savings are built up throughout a person’s working life and are supposed to provide a stable source of income for retirement. However, given the impact of coronavirus traditional financial plans have had to be re-evaluated this year and new insight shows those reaching their later years could be hit the hardest.

This problem could be exacerbated by recent changes in pension contribution trends.

Interactive investor examined data from the ONS and Bank of England and while they found pension contributions have risen in recent months for younger workers, those aged between 56 and 65 saw their pension contributions decrease by 3.6 percent.

Becky O’Connor, the Head of Pensions and Savings at interactive investor, examined the trends: “Our SIPP figures show a significant rise in contributions this year.

“This suggests that people in their thirties and forties were being sensible with the money they were saving during lockdown and squirreling it away for the long term.

With a second one on the horizon, it’s possible similar actions could be taken, and Becky went on to lay out the benefits of utilising pensions for long term savings plans: “Having emergency savings can give peace of mind that you can survive for a while should the worst happen and you lose your job, or you suddenly need to shell out for something big.

“How much cash to keep in instant access savings will depend on personal preference, although three to six months is a good aim.

“But people should take care that over the long term they do not unnecessarily lose money, in real terms, by keeping all their assets in cash.

“For money you don’t need for many years, consider investing in ISAs or SIPPs instead. This way, your money at least has a chance of growing enough to generate a real return.

“Adding to a pension means your money also benefits from tax relief and for younger age groups, hopefully decades of investment growth.”