One in 10 pension savers expects to stop, pause or reduce pension contributions during the next year because of the worsening economic outlook, according to research by portfolio manager Brewin Dolphin.
The survey of more than 2,000 people shows 12% of people cite mortgage repayments as the reason for taking a pension contribution break in the past, echoing research earlier this month from the FSA, which shows 20% of mortgage holders worry about meeting their repayments in the next year.
The Brewin Dolphin research shows school fees and car repayments follow as reasons to stop contributions at 12% and paying off unsecured debt at 10%.
The portfolio manager says more women than men pause or reduce their pension payments while in total, 20% of pension savers have stopped, paused or reduced their payments at some point in their working life.
Charlotte Black, director of corporate affairs at Brewin Dolphin, says: “Historically, women more likely to take a break than men because they have more career breaks and have more priorities. They do prioritise differently; if they see the household under any kind of pressure they’re quite keen to keep the household going in the short-term. The woman’s pension contribution would be the first to be cut rather than the man.”
The average length of time for those who have taken a break stands at almost two years and 13% have done so for more than five years.
Brewin Dolphin expects savers living in Scotland to pause their contribution for 11 months compared to those from the South-East and East-Anglia who do so for about 27 months.
Black says: “Given tighter credit conditions it seems likely that pension payment breaks will become increasingly prevalent as the immediate pressures of servicing mortgages and dealing with credit card debts take their toll.
"This will result in a further depletion of pension pots that have already suffered by the Government’s decision in 1997 to remove tax credits on dividends in pension funds.
"Even the shortest payment break could have serious consequences for the income a pensioner has in retirement.”
The research highlights people aged 25 to 34 as those most likely to take a break. It shows a 32-year-old man aiming to retire at 58 saving £400 a month into his pension fund could expect a £791,760 pension pot in 2034. However, the pot could lose more than £35,000 in value and reach just £756,000 if he stops paying into it for a year.
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