Cost of living crisis sees rise in pension opt-outs

Pausing pension contributions now could cost new entrants to the workforce up to £28,000

clock • 1 min read
Penfold co-founder Pete Hykin
Image:

Penfold co-founder Pete Hykin

The number of savers choosing to opt out of their company pension scheme increased by 29% from March to July this year, analysis by Penfold reveals.

The digital pensions platform provider said the analysis of its own customer base of 40,000 users showed a rapid rise in savers choosing to opt-out came at a time when their finances were becoming increasingly stretched, with Consumer Prices Index inflation reaching a 40-year high of 9.4% in July.

Penfold co-founder Pete Hykin said it was "vital" that those people who were financially able to pay into their pension continued to do so even at a time when many were feeling the pinch on their incomes and savings.

Hykin calculated that if a 20-year-old contributing £200 per month to their pension pauses contributions for just three years, the value of their final pension pot at retirement will fall by £28,074 from £268,675 to £240,600 - a more than 10% decrease.

He said a 25-year-old contributing the same amount would see their pension pot at retirement fall in value by £24,779 if they paused contributions for three years, while a 30-year-old would see their pot will fall in value by £21,870 by the time they reach retirement age.

Hykin added: "The increasing number of opt-outs is a worrying trend, especially as the impact of pausing contributions, even for just a short period, can have a hugely detrimental impact on an individual's finances in retirement."

Eve Holland is an intern at Professional Pensions

More on Industry

FCA's British Steel pensions redress scheme pays out just £8.7m

FCA's British Steel pensions redress scheme pays out just £8.7m

Total redress was lower than £50m estimate due to ‘changing economic conditions’

Sahar Nazir
clock 24 July 2024 • 2 min read
APPT welcomes initial government action on pensions reforms

APPT welcomes initial government action on pensions reforms

Association outlines ‘shopping list’ of areas for future legislation across DB and DC

Martin Richmond
clock 24 July 2024 • 3 min read
Cushon rebrands to NatWest Cushon

Cushon rebrands to NatWest Cushon

Rebrand comes a year after pension and tech firm was acquired by NatWest Group

Jasmine Urquhart
clock 24 July 2024 • 1 min read
Trustpilot