Millions of Britons putting their retirement at risk
With the ongoing credit squeeze and increasing household payments, 2.4 million Britons are set to reduce or even stop saving towards their retirement during the next year, with those aged between 25-34 most likely to do so.
This is according to research from Brewin Dolphin, a portfolio manager, who said by cutting back or stopping pension payments altogether, savers are putting their long-term financial future at risk.
Beverley Lavin of Brewin Dolphin said reducing pension contributions is always a false economy and will certainly cost you much more to replenish your funds in the future, than you will save in the short term. My recommendation is always to focus on pensions for the longer term.
Ms Lavin explains stopping pension contributions can be severe. For example a 32-year-old man aiming to retire at 58 and saving £400 a month into his pension fund, currently valued at £40,500, could expect a £791,760 pension fund in 2034.
However, Brewin Dolphin calculates if he stops paying into his pension for just 12 months, the fund would be worth just £756,201, saving of £4,800 currently, but leading to an eventual loss of £35,559.
With the economy in its current state, it is expected that breaks in pension contributions will become increasingly common as mortgage repayments and credit card debts take their toll, according to Brewin Dolphin.
Traditionally, women are more likely to take a break in pension contributions as they feel unable to continue when they start a family.
A recent survey by Skipton Building Society established over half of under-35 year olds in the UK are contributing nothing towards a pension and admit to struggling with their finances.