Pension contributions resilient amid financial pressures
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The Financial Conduct Authority’s latest update to its Financial Lives Survey found that despite continued pressure on people’s finances, few stopped contributing to a pension or reduced contributions in the year to January 2024, pointing to the power of inertia.
The regulator’s latest survey update, published on Wednesday, gauges the financial resilience and pressure on people amid high inflation. After a full survey in 2022, the FCA conducted an update in January 2023, and again last January, to understand how people are coping financially.
In a positive sign for people’s long-term financial futures, most are continuing to contribute to a pension, with just 3% (1.8m) – which is unchanged from 2023 – saying they have stopped contributing or reduced pension contributions. The low levels of contribution change can be seen as a sign that the inertia principle of auto-enrolment keeps people passive in relation to pensions even as they face considerable financial pressures.
However, the proportion of people over 55 in the population cashing in a pension or taking a lump sum to cover day-to-day expenses has doubled from 1% to 2%, or 1.1m people, in the year to January 2024, perhaps linked to the higher state pension age, coupled with age discrimination in workplaces and treatment backlogs in the NHS.
The Institute for Fiscal Studies noted that an increase in the state pension age from 65 to 66 led to income poverty rates among 65-year-olds more than doubling between late 2018 and 2020.
More have stopped saving and investing
The figures on pension saving and withdrawal come in the context of the other findings showing that people are spending less, as well as saving and investing less to make ends meet amid high energy and food prices.
The proportion of those saying they stopped saving or investing, or reduced how much they save or invest to cope financially, went up from 40% in 2023 to 44% in 2024, raising questions about people’s financial resilience to future shocks.
More positively, fewer are still using savings or investments to cover day-to-day expenses – this has gone down from nearly a third (32%) to 23% of those surveyed.
Other key survey results show:
- in the 12 months to January 2024, 77% (40.5m) of adults spent less or worked more to make ends meet – although fewer reported this than did so for the 6 months to January 2023 (89% or 47.0m);
- 52% (27.5m) had cut back on the amount of electricity, gas or other heating fuel used to save money – vs. 71% (37.7m) who did this in the 6 months to January 2023;
- 48% (25m) had cut back on their food shopping to save money – vs. 55% (29m) who did this in the 6 months to January 2023; and
Should there be greater focus on what is happening to people in their 50s and 60s?
