Recession caused pension contributions to tumble

Contributions into personal pensions have taken a tumble as a result of the economic crisis.

The total amount saved fell from £20.9 billion in 2007/8, to £18.7 billion in 2009/10 according to the latest Pension Trends data from the Office for National Statistics (ONS).

The recession is largely to blame for this decrease, the ONS states, as many people who had previously made small contributions stopped contributing.

Commenting on the data, Darren Philp, director of policy at the National Association of Pension Funds (NAPF), said: “These trends reflect the current state of the economy and the impact this is having on UK households.

“It is understandable that people have more pressing financial priorities during difficult times, but contributing to a pension regularly is vital to ensure a decent income in retirement.”

Auto-enrolment reforms are being rolled out from next year in a bid to get the nation saving into a pension. But, as volatility continues, and money remains tight, as many as 33 per cent are predicted to opt out of being auto-enrolled according to research from Legal & General.

Confusion over the reforms is also evident, as Legal & General found that many of those who are aware of auto-enrolment, are not aware that staying in the process means signing up to a minimum contribution from their current salary.

According to the NAPF, auto-enrolment will result in 5 – 9 million people starting to save into their pension and is a key opportunity to get the UK saving for retirement.