One in ten UK adults reduced pension contributions due to financial strain caused by the Covid-19 pandemic
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PPI and Capita report highlights the impact of Coronavirus on young adults and people from a Black, Asian and minority ethnic background
A new report from Pensions Policy Institute (PPI), sponsored by Capita, has laid bare the impact of the Coronavirus pandemic on people’s ability to save for retirement – with younger people and those from a Black, Asian and minority ethnic background hardest hit.
The Future Life Report explores how changes in the working and retirement landscape may affect the wellbeing of future pensioners.
It highlighted how 20 million adults in the UK (or 38% of the adult population) saw their ‘financial situation worsen’ as a result of the pandemic. This has led to one in ten adults reducing pension contributions, with six per cent stopping payments altogether.
The impact of unemployment has fallen heaviest on young workers. One in five (20%) of 18-24-years-old working in February 2020 found themselves out of work by January 2021. This is compared with seven per cent of workers of all ages.
With growing financial pressures, more than half (57%) of people aged 18-24 used some form of debt between March and September 2020, compared to just 20% of people aged 55 and over. In July 2020, 20% of those aged 18-34 were behind on their bills, compared to 8% of those aged 35 and over.
Among Black, Asian and minority ethnic adults, around 50% of Bangladeshi and 35% of Pakistani men worked in shut-down sectors such as restaurants and taxi driving.
In 2019 there were 288 people over State Pension age for every 1,000 people of working age, but this is projected to swell to 361 for every 1,000 by 2050.
Daniela Silcock, Head of Policy Research at the Pensions Policy Institute, said: “It is hugely concerning to see the disproportionate impact that the pandemic has had. With the growth of the gig economy and the more transient nature of careers, there is a risk that people will become even more disengaged from their retirement savings pot. Given the complexity of decisions, particularly since the introduction of the pension freedoms, many people will find it difficult to make choices that will best meet their health and care needs over the course of later life.”
The report concludes that retirement prospect for young savers today are very different than for previous generations, but that the pensions industry hasn’t changed suitably to prepare people for retirement.
Stuart Heatley, Managing Director of Capita Pensions, added: “Covid-19 has clearly exacerbated issues around gender and racial social disparities and periods of unemployment, but let’s be honest, these trends have been around for some time now and it really is time we addresses them. The simple fact is that saving for the future will always seem pointless if today is a financial struggle month to month.
“Advice plays an important role in supporting people while making critical choices about their future, but most of this guidance currently focuses on at-age retirement decisions rather than supporting ongoing discussions throughout an individual’s career. It is clear that with less job certainty, a rise in the gig economy and expectations of multiple roles (some simultaneously) the current pension system is outdated and no longer reflects the needs of an aging population and society.”