Categories: Pensions - Retail
The 400,000 people who have dropped out of personal pension saving since 2008 are unlikely to make up the contributions later in life and will face reduced income in retirement, Axa Wealth has warned.
Figures from the Office for National Statistics (ONS) showed number of people contributing to personal pensions continued to fall, from 6.4 million in 2008/09 to 6.0 million in 2009/10.
In 2010 there were 8.3 million active members of occupational pension schemes, the lowest level since the 1950s.
Andy Zanelli, head of retirement planning, Axa Wealth, said there had been a 6% drop off in personal pension saving.
He said: "This drop in private pension contributions is indicative of the difficult economic times across the UK, but is further evidence of a worrying trend.
"It is understandable that people are looking to make cut-backs and savings from their monthly outgoings, as they continue to feel the pinch and struggle financially."
Zanelli (pictured) added: "Postponing pension contributions can provide immediate relief in the short-term. However, the long-term effect could be considerable and reduce income in retirement if they stop for a prolonged period of time. People need to be aware that making up the shortfall in contributions could take years to achieve and ultimately delay plans for retirement."
Hargreaves Lansdown head of pensions research Tom McPhail commented that the average 8.9% of contributions to defined contribution (DC) pensions was not enough to buy a decent retirement income.
"Worryingly, there are signs that government policy now seems to be to do everything possible to discourage investors from taking any interest in how much they are saving, how long they are saving for or how they will get their retirement income paid out at the end. The consequence of this is likely to be millions of people sleepwalking towards an inadequate retirement income.
"It is absolutely vital to focus on how much people should be saving if they are to hit their retirement income target. Anyone who is saving less than 10% to 15% of their earnings into a retirement plan is unlikely to be saving enough."
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