UK workforce cuts voluntary pension contributions by half

02 April 2008 / by Rachael Stiles
A workforce that is struggling against the tide of a global credit crisis has been forced to cut their contributions into voluntary pension schemes by half over the last 12 months.

Research from Prudential has found that adults in the UK have cut down on the amount they pay into private and company pension schemes by an average of £134 a month compared with this time last year.

The figures were revealed in Prudential's 2008 Retirement Savings Report, which showed that adults are now voluntarily contributing an average of £144.57 a month into their pension scheme, which amounts to just £1,734 a year – significantly less than the £279.38 they were said to be contributing in the 2007 report.

Furthermore, 55 per cent of non-retired British adults admitted that they do not pay into a company or private pension scheme at all, which is a one per cent increase on last year's figures; the report found that 63 per cent of women and 44 per cent of men currently make no contributions.

Those who are paying into a corporate or private pension anticipate that they will be drawing an average pension of £22,504 a year, and men expect an even bigger annual pension of £26,355.

However, Prudential has warned that such a pension payout would require a 20 year old male to save £286 each month until the age of 65, and a 20 year old female to put aside £413 a month until the age of 60.

"It is deeply concerning to see that the amount UK adults are personally paying into pension schemes has fallen so dramatically in the past year." said Gary Shaughnessy, managing director of Retail Life & Pensions at Prudential.

Rising household bills, mortgage repayments and below-inflation pay increases have combined to make it increasingly difficult for people to put money aside for the future, but Mr Shaughnessy says that reducing pension contributions is not the way to keep finances afloat, because it will cause larger problems in the future.

He believes that "continuing to save as early as possible is vital if people are to build a pension pot large enough to maintain their lifestyle in retirement."

He concluded: "While we always encourage people to look at their wider wealth portfolios (including housing equity and other savings) the current uncertain economic conditions and concerns over house-price deflation means that maintaining pension contributions is more important now than ever."

© Fair Investment Company Ltd