SUPPORT REQUIRED: WHY EMPLOYERS MUST STEP IN TO HELP WORKERS WITH LONG-TERM SAVINGS
by Mark Pemberthy Head of DC & Wealth Buck The COVID-19 pandemic has derailed the retirement plans of millions of people in Britain, with increased financial difficulties causing them to dip into their long-term savings, pension pots, or stop pension contributions altogether. While this can help to cover costs in the shortterm, disrupting long-term savings can have serious financial consequences for individuals later in life. Employers have a role to play in encouraging workers to protect their pensions, as well as build financial resilience.
contributions, as well as dip into their pension pot, has still been alarming.
Contribution crisis
More worryingly, however, has been the increase in older workers dipping into their pension savings to cover essential costs during the pandemic. This has largely been driven by people aged 55 and over choosing to access to up to 25% of their pension savings tax-free as a financial solution to short term financial pressures. In doing so, they are risking longterm financial consequences.
The recession brought on by the COVID-19 pandemic has caused financial stress for many, so people are understandably looking for ways to cover any financial losses caused by being put on furlough or having their pay cut. However, the rate at which savers have been choosing to end or reduce pension
Recent research found that one in ten UK workers have paused pension contributions, with 37% of those who had paused citing the reason being to use the money for essential spending. Royal London research showed that millennials were most likely to have paused or stopped pension contributions, with two in five millennials doing so during lockdown.
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