More than one in 10 high net worth individuals (HNWIs) have cut their pension contributions over the past year, amid the continued rise in the cost of living.
The latest findings from the Saltus Wealth Index Report, which surveyed 2,000 people with assets of £250,000 or more, revealed that 93% said the current economic environment has negatively impacted their lifestyle and financial planning.
The most common change HNWIs have made in response to rising costs is to cut down on their personal spending (16%), while 11% have reduced their pension contributions.
However, the vast majority of HNWIs underestimate the amount they will need in their pension for a comfortable retirement. On average, HNWIs believe they will need a pension pot of £471,198, but in reality, they are likely to need retirement savings of almost £800,000 plus the full state pension, says Saltus.
According to data from the wealth manager, the average value of respondents’ pension pots is £424,259. While most need to be making use of the full £60,000 allowance if they are going to fill that gap, only 3% of HNWIs are currently doing so.
The average contribution is £2,639 per month, but more than a fifth (22%) are saving less than £1,700 a month into their pension.
Mike Stimpson, partner at Saltus, said: “The fact that many HNWIs are cutting their contributions to help cover rising costs in the short term means that they are making it tougher to establish a pension pot that will fund a comfortable retirement.
“Pensions are one of the most phenomenal vehicles for growing your money. If you are a higher rate taxpayer, the potential tax saving is equivalent to a 72% return just by putting the money into a pension. So, cutting contributions should be a last resort.”
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