One in five people have reduced their pension contributions or stopped saving for retirement altogether due to cost-of-living pressures.

As household budgets continue to tighten, new research suggests 14 per cent of people have stopped paying into their pensions while eight per cent have cut their contributions.

Men are more likely to have taken the action than women, as well as wealthier people. And younger people are more likely to have done so than older workers.

Meanwhile, 62 per cent say they have not changed their approach to pension contributions.

Pension cutbacks are ‘no surprise’

Helen Morrisey, head of retirement at Hargreaves Lansdown which carried out the study of around 2,000 adults, said the actions are “understandable”.

“Rising prices have made balancing budgets a real struggle and it’s no surprise that, after making all the cuts they can elsewhere, people are turning their attention to their pensions,” she said.

“Such actions are understandable – keeping up pension contributions is extremely important but, given the enormous pressures our finances have been under for such a sustained period of time, it makes sense if people are prioritising the here and now.”

Rebuild as soon as possible

It is vital that people resume their pension contributions as soon as they are financially able to, she said.

“The most important thing is to make sure that, when things get better, that you resume your pension contributions as soon as you can.

“Make a note in your diary at a regular interval to remind you to assess whether you can afford to restart, otherwise it may be something you don’t get round to doing.”

Ms Morrissey added that other ways to rebuild a pension after a break is to make sure to increase contributions if you receive a pay rise or get a new job.

She said: “Doing it straightaway means you don't get used to having the extra cash.

"It's also worth checking whether your employer operates a matching system where they will boost their contribution to your pension if you increase yours. This can really help you rebuild your pension planning after a difficult time.”

Need advice about saving for retirement? We can help.

Moving from job to job and starting a new pension each time can present a headache when the time arrives to think about retiring.

Few of us can recall every pension provider we have ever had and unless you have carefully filed all the relevant paperwork, you will need help tracking them all down.

But there is no need to panic. The Government website can help you track down lost pensions.

What it won’t do is tell you whether you have a pension or its value, but it will assist in finding the details.

To use the service, you just need to remember who your employer was at the time and it will provide contact details of the pension providers for you to get in touch.

It can also help locate personal pension providers.

Plan for the future

Although there is a state pension, many of us choose to invest in a further pension through work to help save for retirement to enhance your financial security in later years.

One of the significant advantages of a workplace pension is that your employer is typically required to contribute to it. This "employer contribution" is essentially free money added to your retirement savings, which can significantly boost your pension fund over time.

Contributions to a workplace pension often come with tax benefits. The money you contribute is typically taken from your pre-tax income, meaning you receive tax relief on those contributions. This can make a significant difference in the overall value of your pension fund.

Workplace pensions often operate on an automatic enrolment basis. This means that if you're eligible, you'll be automatically enrolled in the pension scheme, making it easier to save for retirement without having to take active steps.

Get a better return

As workplace pensions are often managed by professional pension providers or fund managers who have experience in optimising investments for long-term growth, this expertise can potentially lead to better returns on your investments compared to managing your retirement savings on your own.

It's important to note that the specifics of workplace pensions can vary, and regulations may change over time. It's advisable to seek personalised financial advice to understand how a workplace pension fits into your overall retirement planning and financial situation.

To start looking for a lost pension visit https://www.gov.uk/find-pension-contact-details

Let us help. Talk to us about your pension concerns.

1 September 2023 – Due date for corporation tax due for the year ended 30 November 2022.

19 September 2023 – PAYE and NIC deductions due for month ended 5 September 2023. (If you pay your tax electronically the due date is 22 September 2023)

19 September 2023 – Filing deadline for the CIS300 monthly return for the month ended 5 September 2023.

19 September 2023 – CIS tax deducted for the month ended 5 September 2023 is payable by today.

1 October 2023 – Due date for Corporation Tax due for the year ended 31 December 2022.

19 October 2023 – PAYE and NIC deductions due for month ended 5 October 2023. (If you pay your tax electronically the due date is 22 October 2023.)

19 October 2023 – Filing deadline for the CIS300 monthly return for the month ended 5 October 2023.

19 October 2023 – CIS tax deducted for the month ended 5 October 2023 is payable by today.

31 October 2023 – Latest date you can file a paper version of your 2022-23 self-assessment tax return.

There are two types of National Insurance contributions (NICs) payable by most self-employed people. These are known as Class 2 NICs and Class 4 NICs.

Class 2 NICs are paid by all self-employed taxpayers unless they earn under the Small Profits Threshold (SPT), currently £6,725, which remove the necessity to pay NICs. Class 2 NICs are currently payable at a flat weekly rate of £3.45 for the 2023-24 tax year. Class 2 NICs count towards payments such as the basic State Pension, the employment and support allowance, maternity allowance and bereavement benefits.

In addition, most self-employed people are also required to pay Class 4 NICs. The self-employed are required to pay Class 4 NICs (as well as to Class 2 NICs) if their profits are £12,570 or more a year. Class 4 NIC rates for the tax year 2023-24 are 9% for chargeable profits between £12,570 and £50,270 plus 2% on any profits over £50,270.

There is also a specific list of jobs where class 2 NICs are not payable. These are:

• examiners, moderators, invigilators and people who set exam questions;
• people who run businesses involving land or property;
• ministers of religion who do not receive a salary or stipend; and
• people who make investments for themselves or others – but not as a business and without getting a fee or commission.

If you fall within any of these categories, it may be beneficial to get a State Pension forecast and examine whether to make voluntary Class 2 NICs to make up missing years.

You can usually claim tax relief for your private pension contributions. There is an annual allowance for tax relief on pensions of £60,000 for the current 2023-24 tax year. The annual allowance was £40,000 in 2022-23.

There is a three year carry forward rule that allows you to carry forward any unused amount of your annual allowance from the last three tax years if you have made pension savings in those years. There also used to also be a lifetime limit for tax relief on pension contributions but this was removed with effect from 6 April 2023.

You can qualify for tax relief on private pension contributions amounting to 100% of your annual earnings, subject to the overriding limits. Tax relief is paid on pension contributions at the highest rate of Income Tax paid by the contributor.

This means that if you are:

• A basic rate taxpayer you get 20% pension tax relief.
• A higher rate taxpayer you can claim 40% pension tax relief.
• An additional rate taxpayer you can claim 45% pension tax relief.

The first 20% of tax relief is usually applied by your employer with no further action required if you are a basic-rate taxpayer. If you are a higher rate or additional rate taxpayer, you can claim back any further reliefs on your Self-Assessment tax return.

The above applies for claiming tax relief in England, Wales or Northern Ireland. There are regional differences if you are resident for Income Tax in Scotland.