Millions of workers have warned a pensions blunder could cost you £13,600 in retirement

Workers might be tempted to suspend their company pension contributions during the cost-of-living crisis – but that could be a costly mistake when it comes to your retirement

Workers risk losing thousands of pounds later in life
Workers risk losing thousands of pounds later in life

Workers who suspend their pension contributions during the cost-of-living crisis risk losing thousands of pounds later in life, an investment firm warns.

Families are under tremendous financial pressure from rising bills, which means they may be tempted to pay less into their retirement plans.

Employers are obliged to enroll their employees in company pension schemes.

The minimum contribution that must flow into your company pension each month is 8% – this is made up of 5% of your net salary and 3% of your employer.

You will automatically be placed in an occupational pension scheme if you are aged between 22 and state pension age and are earning at least £10,000 a year.

But even if you are eligible and automatically opted in, you can opt out.

Are you afraid to save for your retirement? Let us know: mirror.money.saving@mirror.co.uk

Here’s how to prepare for retirement

The main reason people choose not to join an occupational pension scheme is that it lowers their net income.

But even if your monthly salary is lower, the money is still yours – you’re just putting it aside for later life.

Investment firm Aegon is warning those who may choose to turn down their company pension to slightly increase their salary during the cost-of-living crisis that it could cost thousands of pounds.

Aegon’s analysis shows that skipping your pension contributions for a year could mean you miss out on £4,600.

If you opt out for two years you could lose £9,100 and for three years you could miss out on £13,600.

Of course, the exact amount you put into your pension each month depends on your salary and contribution levels.

According to Aegon, these figures are based on a 25-year-old with an average salary of £29,000 and pension contributions of £75 a month.

The numbers are also based on a 3% annual increase in that amount and 4.25% investment growth.

Your company pension is separate from the statutory pension.

Kate Smith, Aegon’s head of pensions, said: “Those looking to cut their pension contributions should carefully consider the long-term implications before making any decisions.

“While there may be a small immediate increase in net pay, Aegon’s analysis shows you could be thousands of pounds worse off in retirement.

“Furthermore, workers who pause pension contributions are very likely to lose valuable employer contributions that help increase retirement savings.”

Energy bills were the biggest hit to household bills last month after regulator Ofgem raised its price cap for those with typical use by £693 on April 1.

Added to this are increased municipal tax bills, water bills, broadband and mobile phone costs, and petrol and diesel prices at record highs.

In addition to rising bills, workers and employers are paying more into Social Security after a 1.25 percentage point increase.

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https://www.mirror.co.uk/money/millions-workers-warned-pension-mistake-26957325 Millions of workers have warned a pensions blunder could cost you £13,600 in retirement

Fry Electronics Team

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