Pensions were destroyed as pensions were sacrificed to meet rising costs

Retirement is shrinking as more workers sacrifice retirement savings to meet the rising cost of living, new research has found.

One in five workers have either stopped or reduced their pension contributions in the past 12 months, according to research by the Institute for Pensions Management, a trade body. Another 20 pieces could follow in the coming months, it has been revealed.

Sarah Cook, of PMI, warned that future generations of retirees will not have a nest egg large enough to see them through to old age if the trend continues.

She said: “The nation as a whole has lost confidence in its prospects for a comfortable retirement, and that is something that should alarm us all,” she said.

“A significant portion of the general public is saving at rates lower than 12 months ago.” They are aware of the impact it will have, but they feel they have no alternative.”

Many workers no longer have extra cash to save at the end of the month as household bills climb to highs not seen in decades. Three-quarters are worried that the current life crisis means they will have a less comfortable retirement in the future, the PMI said.

Ms Cook added: “By reducing or stopping contributions altogether, savers will be hit with a double whammy as they will not enjoy the benefits of tax relief or employer contributions.”

Saving for retirement is one of the most efficient ways to invest, as everyone is entitled to tax relief on contributions based on a higher rate of income tax. This is known as ‘deferred’ taxation and is designed as a reward for locking up money to provide retirement income in the future. A higher rate taxpayer would be entitled to 40 percent relief on their pension contributions.

However, for many, the immediate need for cash outweighed the long-term appeal of pensions. Families have faced rising costs on all fronts this year, as the outbreak of war in Ukraine sent energy and food prices soaring.

Shoppers are forecast to spend an extra £60 on their groceries this month compared to last year, according to market research firm Kantar, as food inflation hits 16 per cent.

Meanwhile, energy bills have risen as the unit price cap for gas has risen from 4p per kWh to 10p from last year. Hundreds of thousands of homeowners also saw their mortgage bills rise as borrowing costs rose.

The PMI has warned that it expects another wave of workers to cut or suspend their pension contributions as they struggle to cope with “post-Christmas debt”, as well as a continuation of increased energy bills next year.

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