On the go: Two-fifths of businesses with more than 500 employees have warned that employees are lowering their pension contributions in response to the cost of living crisis, according to one pension provider.
There are concerns in the retirement industry about some savers’ willingness, or ability, to save for retirement against a backdrop of high inflation and soaring utility bills.
Forty-five per cent of the 500 HR managers surveyed by Cushon reported that some of their employers had already left their pension schemes.
Opt-out rates are relatively low, however, at 11 per cent. But 77 per cent of savers, polled in a survey of 2,080 adults, have indicated that they will reduce their outgoings in response to the rising cost of living.
Cushon hit out at the media’s reporting of the recent liquidity crisis in defined benefit pension schemes, which followed the government’s September “mini” Budget. Doubts were cast by some sections of the press over the solvency of DB schemes before the Bank of England commenced its gilt-purchasing programme, an assessment that has been widely rejected in the pensions industry.
“By stoking fears that the pensions market is unstable, this risks misleading savers into making financial decisions which will hurt them in both the short and long term,” Cushon head of policy and research Steve Watson said.
Forty-seven per cent of businesses told Cushon that their employees want financial support schemes. The provider suggested several options, including redirecting some pension contributions into accessible schemes.
Cushon also mooted a salary-sacrifice scheme, where a saver lowers their salary by an amount equal to their contributions, with their employer then paying their total contributions. This saves both parties on the cost of national insurance contributions.
“By providing additional support, employers can help to ensure that cutting pension contributions becomes a last resort and people’s financial futures remain secure,” Watson said.
