Survey reveals saving for a pension is rapidly falling down people’s financial priorities as cost of living crisis bites

A growing number of employers are seeing more employees requesting to reduce and stop pension contributions according to a new survey.

51% of employers surveyed in LCP’s 2023 Financial Wellbeing report said employees have requested to reduce pension contributions, and 47% have had employees request to stop contributions altogether. 10% are also expecting both to happen. The report surveyed 10,000 employees and 500 employers.

This trend is also reflected in the fact that saving for a pension has fallen from 1st to 6th place in people’s financial priorities. This has been replaced by budgeting and managing everyday money as people deal with the fallout from the cost of living crisis.

Other findings in the survey include:

• More people are feeling financially vulnerable earlier in the pay cycle. 21% of employees said they feel concerned or negative and can’t cope with their finances in the first few days after payday. This rises to 32% halfway through the pay cycle and 45% in the few days before their next payday. These are all up by 10% since 2022.
• 65% of employees have borrowed money, up from 59% in 2022. While 19% said they had taken money out of their savings, 6% said they had used a loan shark
• More than half (55%) of employees say they have struggled to cope with daily life in the past year.
• LCP estimates that employees taking time off or spending work time dealing with personal issues costs a firm of 2,500 people £1,157,867 per year

Heidi Allan, Senior Consultant and Head of Financial Wellbeing at LCP, commented: “There has been a lot of speculation that people will start to reduce or halt their pension contributions as they try and save elsewhere as life becomes more expensive. Our survey highlights that this is a trend that employers are starting to see and are expecting to increase.

“Of course, as inflation bites and energy costs remain high, it’s no surprise that people are prioritising saving for today rather than saving for tomorrow. It’s clear that financial issues are taking up an increasing amount of employee’s time and having an impact on businesses' bottom line.”