COVID-19 affects retirement saving plans for 3.1 million
COVID-19 has caused more than three million people to interrupt their retirement saving plans, by either reducing or entirely stopping their pension payments, according to research by Scottish Widows.
The research found that 10% of UK adults who have a pension and are not yet retired will need to work for longer, or significantly increase how much they save later on, in order to make up the shortfall.
Those who do not could face pensioner poverty in later life.
Almost a quarter of workers (24%) are worried about paying for essentials like food and energy, 20% are concerned about paying the rent or affording their mortgage, and 19% have seen their income fall because of coronavirus.
These short-term financial concerns are impacting long-term saving, with 10% reducing pension contributions or stopping their savings completely.
More than two in five (43%) self-employed workers have seen a drop in their income, almost three times the proportion of employees (16%).
As a result, 19% of self-employed workers have felt the need to pause or reduce pension contributions.
This is on top of the 41% of self-employed people who in 2019 said they were not saving anything towards retirement.
Part-time workers also tend to be less well prepared for retirement, and 28% have lost their job or been furloughed due to coronavirus, compared with 18% of full-time workers.
Part-time workers are therefore two-and-a-half times more likely to change their long-term savings habits than full-time workers (15% versus 6%).
Almost one in five (18%) people aged between 18 and 24 have reduced or stopped their pension contributions.
Of this age group, 7% have actively moved their pension to a lower risk investment fund, despite being many years away from retiring.
Women who are not yet retired are more worried about paying for essentials than men (27% versus 22%), and are more concerned about paying the rent or mortgage (22% versus 18%).
Considerably more women say that financial worries are negatively impacting their overall mental wellbeing (72%) than their male counterparts (63%).
In the South East, just 6% of savers have felt the need to reduce or pause pension contributions.
This rises to 16% for those in London, the second highest rate in the country after the West Midlands (17%).
Scottish Widows has previously called for a single lifetime savings pot to be introduced, which would help people better withstand financial shocks, such as a fall in income, while still saving enough for a comfortable retirement.
This would be funded through an extension of automatic enrolment, but with higher contribution levels.
Its modelling has predicted that under these circumstances, savers could withdraw £1,000 up to three times during moments of financial crisis, or take out 50% of their early savings for a deposit on their first home.
Pete Glancy, head of policy at Scottish Widows, said: “The COVID-19 crisis has revealed a painful lack of financial resilience in the UK, leaving millions of people exposed with little or no safety net to fall back on.
“As the full impact of this crisis becomes clearer, more people may feel forced to pay for today’s essentials with tomorrow’s savings.
“However, this will only prolong the economic pain of coronavirus and could result in more people facing poverty in retirement.”
He added: “Introducing a single lifetime savings pot would allow flexible access to savings during times of financial hardship.
“Not only would this have supported people struggling with the impact of coronavirus, but could also help crack the lifetime savings puzzle at the same as building longer term financial resilience.
“The next time that a crisis hits, more families could avoid being forced to choose between security today and protecting tomorrow.”