Covid-19 pressures mean pensions have become a second-string issue for many.
A fifth of households were saving less into their pensions at the end of 2020 due to pressures on finances caused by Covid-19, according to research.
In the final quarter of last year, one in five people cut how much they contributed to their retirement savings, the Scottish Widows UK Household Finance Index found.
Almost the same proportion would have been likely to withdraw from their pension during the period if they had early access.
The pandemic has forced many people to focus on short-term financial needs, rather than their longer-term retirement saving goals.
More than a third (36%) of UK households are saving for emergencies amid ongoing financial pressure and pandemic-related uncertainty, the research suggested.
Varying levels of financial resilience come through in the data. A little more than one in five (22%) households said they would only be able to pay for essentials for less than a month without an income.
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Only 40% would be able to cover essentials – such as food and accommodation – for more than six months, the length of time financial experts often say people should have as emergency savings.
Jackie Leiper, workplace savings director at Scottish Widows, says: “The continued pressure on families’ financial resilience and lack of protection leaves people in danger of saving less for the long term and more for emergencies due to uncertainty over the immediate future.”
Households are also lacking other types of financial protection. Less than half of respondents (46%) to the Scottish Widows survey have life insurance or plan to get it within the next two years. Just a fifth (18%) have cover in the event of critical illness.
Overall, UK household financial well-being declined faster at the end of 2020 than at any time during the five years prior to the Covid-19 pandemic, according to the Scottish Widows UK Household Finance Index.
Labour-market shocks associated with the coronavirus pandemic have been felt more by young people and the lowest paid, according to findings from the Office for National Statistics (ONS) published today.
People aged under 30 and those with household incomes under £10,000 were around 35% and 60% more likely, respectively, to be furloughed than the general population.
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Of those furloughed or unable to work, more than half (52%) in the top fifth income bracket continued to be paid in full, while this was the case for only 28% of those in the lowest income bracket.
Employed parents were almost twice as likely to report a cut in income than the general employed population, the ONS found, although this gap gradually narrowed throughout 2020 as schools reopened.
Zoe Bailey, chartered financial planner and director at advice firm Tilney, says: “Considering how long the road to full economic recovery in the UK could be, more needs to be done to encourage people to spend time educating themselves on their personal finances.”
People should look at what policies they have, what policies are out there to help them, and “take real action and start planning for their future now, so they can not only recover any finances lost in 2020 but also start to think about and secure their long-term plans”, she added.
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