UK Government: Fewer people actively stopped saving into pensions during pandemic

ended 02. September 2021

A detailed report this morning from the Department for Work & Pensions shows the percentage of workplace pension savers who actively stopped saving fell slightly during the pandemic.

It says: "The active decision stopping saving rate (the proportion of workplace pension savers who make an active decision to stop saving within each period) has fallen slightly from 0.75% in the financial year 2019 to 2020 to 0.63% in the financial year 2020 to 2021, but has remained largely consistent with previous tax years."

IFAs respond

We asked three IFAs based around the UK for their views on this. Select comments directly below, full comments at the bottom of this article. 

Carl Roberts, Managing Director at Milton Keynes-based RTS Financial Planning: “Throughout Covid, the majority of our clients have continued exactly as they were, whether in relation to contributions to, or withdrawals from, their pensions. Where we did see some material changes on the retirement savings front was with our business owner and director-level clients. Understandably, many business owner clients either paused or significantly reduced their pension contributions during Covid because they were worried how their businesses were going to be impacted.”

Joshua Gerstler, chartered financial planner at Borehamwood-based The Orchard Practice: "Outgoings during the pandemic fell for almost everyone as there were no meals out, holidays, gyms and other ways to spend money. As a result, where possible our clients increased the monthly contributions they were making into their pensions and investments. As life has started to return to normal, many of our clients are keeping these higher contributions in place as they have realised they can in fact manage with less disposable income, and that this will enable them to retire even earlier and spend more time enjoying life, which has been brought into sharp focus by the pandemic."

Adam Walkom, Co-founder at London-based Permanent Wealth Partners: “Our clients tend to be higher earners, so most tend to look to maximise pension contributions where possible, and have stuck to that approach even during the pandemic. We also have an in-house view that pension tax relief is only going to get worse, so taking advantage of it where possible is normally a prudent move.”

Fewer people actively stopped saving into pensions during pandemic

3 responses from the Newspage community

Star Quote
"When the pandemic began, and global stockmarkets started their temporary decline, we called all of our clients to reassure them that there was no need for panic-selling and that we had a financial plan for them and were sticking to it. We also encouraged our clients to put more into their investments and pensions while the markets were 'on sale', which was very much the case at the beginning of the pandemic. All our clients followed the first piece of advice and a large proportion followed the second. "Outgoings during the pandemic fell for almost everyone as there were no meals out, holidays, gyms and other ways to spend money. As a result, where possible our clients increased the monthly contributions they were making into their pensions and investments. "As life has started to return to normal, many of our clients are keeping these higher contributions in place as they have realised they can in fact manage with less disposable income, and that this will enable them to retire even earlier and spend more time enjoying life, which has been brought into sharp focus by the pandemic."
"Pandemic or no pandemic, taking the time to review your pension can make a huge difference to your long-term wealth. Our clients tend to be higher earners, so most tend to look to maximise pension contributions where possible, and have stuck to that approach even during the pandemic. We also have an in-house view that pension tax relief is only going to get worse, so taking advantage of it where possible is normally a prudent move. "For most people, their pension is going to be the second-largest asset they ever own, yet they totally ignore it. Most people tend to look at their pension statement once a year, not really understand it properly, then just file it or throw it away. It's a travesty but it is also one of the biggest opportunities we have to add significant value for our clients. Everyone needs to take a long and hard look at what is in their pension. Also, what charges are they paying? And how has the performance of their fund been overall?"
"During the past 18 months, throughout Covid, the majority of our clients have continued exactly as they were, whether in relation to contributions to, or withdrawals from, their pensions. Where we did see some material changes on the retirement savings front was with our business owner and director-level clients. "Understandably, many business owner clients either paused or significantly reduced their pension contributions during Covid because they were worried how their businesses were going to be impacted. "Thankfully all have got through unharmed and have now restarted their pension contributions at the same level as before. "For those that have actually saved more money during the pandemic, we have found that ISAs have become their preferred choice over pensions as they let people access their money quickly in a crisis rather than have to worry about the age restrictions that apply to pensions. "Some of our director-level clients had bonuses suspended or stopped and this therefore led to pension contributions being significantly reduced. Some were unfortunate enough to lose their jobs but as they considered a mini-retirement, a number chose to only make withdrawals from their pensions on a temporary basis via their Pension Commencement Lump Sum, therefore avoiding the Money Purchase Annual Allowance. "In other words, they are expecting to be back in work soon and therefore will once again want to make larger contributions to their pensions."