Financial resilience remains a pressing challenge for the UK in the aftermath of the Covid-19 pandemic, new research from Royal London has revealed.
The retirement specialist said the pandemic had forced many people to rethink their financial priorities, resulting in pension contributions declining in the first twelve months of the pandemic.
In 2020, one in five (19%) of those who contributed to a pension either reduced or stopped payments, with millennials being the most likely to do so (40%).
The research found that while three fifths (59%) of employees who made reductions due to the pandemic had since increased their payments in 2021, including more than one in 10 (12%) who had restarted contributions, many older individuals were less likely to do so.
Just one in 10 (99%) of those aged 55 restarted contributions after the pandemic, compared to 77% of those aged 18-34 and 51% of those aged 35-54.
There was also a gender divide, with fewer than half of women restarting their pension contributions compared to over two thirds of men.
Sarah Pennells, consumer finance specialist at Royal London, said: “Financial resilience is one of the most pressing challenges as the UK emerges from the pandemic. The cost of living increases are a major source of financial anxiety for a significant number of people and the pandemic has served to exacerbate these concerns.
“The financial pressures facing individuals are, rightly, the main focus for policymakers at present. However, it is also the case that many people – in particular women and the self-employed – are still not saving enough to achieve an adequate level of income in retirement. As such, it is important that we don’t neglect the issue of helping people to build greater financial resilience over the longer-term.”
Pennells called upon the Government to focus upon extending automatic enrolment to include those on lower incomes.
Pennells said: “We would urge the Government to focus on implementing the Department for Work and Pensions’ proposed changes to the eligibility criteria for automatic enrolment, so that more lower income workers are enrolled into workplace pensions and develop the habit of saving for retirement.”
Pennells added: “It is also important to ensure the swift implementation of the Net Pay tax anomaly solution by HMRC, to address the issue of workers – mainly women – who earn less than the personal tax threshold missing out on tax relief on pension contributions. The proposed solution, whilst welcome in principle, means that in practice impacted customers will not be able to claim top ups until the 2025/26 tax year. This prolonged implementation timetable seems unnecessary and will disproportionately impact women.”
[Main image: ed-stone-unsplash]
