A poll in early June, by Royal London, suggests that young workers are opting out of pensions because of the Covid 19 crisis.

The poll, which surveyed 2,000 people aged between 18 and 34 years of age, found that a large percentage of employees are either reducing or stopping contributions - and it cautions that this could cause long term damage to retirement prospects.

The research found that 28 per cent of those aged between 18 and 34 years had reduced their pension contributions - with a further 12 per cent stopping their contributions altogether.  However, only 16 per cent of those in the age group 35 to 53 years had stopped or reduced their contributions. Of the 40 per cent who had reduced or ended their contributions, the main reasons given were pay cuts; redundancy and worries over job security.

Other reasons for reducing or stopping pension contributions included concern over an unstable investment market; that they had more important priorities or that they had left their employer.

Of the over 55 year olds only 9 per cent have either halted or cut pension their contributions.

It was suggested that those who stopped saving into a pension because of redundancy might be more likely to pick it up again later as they will be auto enrolled when they find a new job.  However, people who simply cut back might not have the impetus to resume saving.

Lorna Blyth - Head of Investment Solutions at Royal London - stated that employees were taking this step to compensate for lost income caused by the virus outbreak.   

She said:

“The Covid pandemic has put a real strain on many people’s finances and the research shows many are looking to reduce their outgoings by cutting or even stopping contributions.”

Only 11 per cent of those surveyed stated that they had begun to make contributions for the first time - or had increased them during the lockdown.

However, 79 per cent said that they planned to resume - or increase - their contributions at some future point, with 37 per cent saying that they planned to do so in the next three months.

Lorna Blyth stated:

“It is vital that people follow through with their intentions to resume contributions as soon as they are able if they are to avoid long-term damage to their retirement prospects.”