Today (23rd September), the quarterly Financial Survey of Pension Schemes has revealed that total employer pension contributions fell by 5% during Q1 of 2021.
The quarterly survey carried out by the Office for National Statistics (ONS) found that the drop has been primarily driven by employers putting less cash into topping up their defined benefit funds.
However, there was also an encouraging 2% rise in the number of people paying into workplace pensions, while employee and employer contributions also rose.
According to personal finance experts at money.co.uk, given the massive disruption of the past year, now is the time to review your pension options to make sure your chosen scheme is setting you up in the best possible way for retirement.
James Andrews, senior personal finance expert at money.co.uk, said: “Today’s findings show that pension contributions have been massively affected by COVID-19, just like many aspects of our day to day lives.
“But it’s also good to see people paying in where they can – with more people paying into a workplace pension and a rise in total contributions too.
“And it’s money well spent in most cases – with early pension contributions having longer to grow. Workplace pensions are also topped up by bosses, seeing workers earning more than £10,000 a year offered at least an extra 3% of their salary to pay into a pension as long as they pay in 5% themselves.
“If you want to save more than this, some employers will let you add extra voluntary contributions on top.
“Alternatively, you could take matters into your own hands and open a Self Invested Personal Pension. You won’t get a top up from your boss, but you will get a tax break on the first £40,000 you save a year until you start drawing money from your funds.
“When opting for a Self Invested Personal Pension, you pick a company to invest in, choose which funds or assets you want to invest in and how much to put in each one, and then manage the pension online. You are responsible for the performance of your pension when you invest in a Self Invested Personal Pension, so take the time to study each fund before you start investing.
“All direct contribution pensions carry an element of risk, due to them being investments, but a Self Invested Personal Pension could be considered a greater risk due to the fact the decisions are all up to you, as opposed to a fund manager or similar professional. However, it is worth remembering that a pension is a long term investment and as such the higher rewards associated with shares and investments may outweigh short term losses.
“Pensions for many of us are a daunting prospect, but regardless of your situation there are experts who can assess your individual situation and advise you on your options.
“It’s also worth remembering that there is no reason that you can’t combine all of the above methods to spread your bets, rather than relying on one method to fund your retirement.
“If you are paying into your pension and are worried about how it is taxed, the read this easy guide: https://www.money.co.uk/pensions/how-is-your-pension-taxed.htm.”