With the cost of living crisis taking its toll you may be tempted to cut back on your pension contributions to save money.
If you're auto-enrolled into a pension scheme run by your employer, it's likely that at least 5% of your salary is going into your pension.
However, although reducing or stopping your contributions could be a tempting quick win for your finances, it will have consequences when you come to retire.
Here, Which? explains what you should consider before cutting your pension contributions.
Not only are people paying more every month, but reached 7% in March. According to the Office of National Statistics, the biggest price rises driving up inflation have been transport, clothes and shoes and food.
A snap poll by Interactive Investor last month found a quarter of people (24%) have stopped paying into a long-term investment account to cope with the rising cost of living.
According to its survey of 1,473 people, 8.5% said they had stopped contributing to their stocks and shares Isa, 5% had stopped contributing to their pension, 5% to their savings account and 4.5% to their general investment account.
If you're over the age of 22, in full time employment, and earn over £10,000 a year, it's likely you were automatically enrolled into your workplace pension when you joined the company.
Auto-enrolment pensions were launched in 2012 and now have a total minimum contribution of 8% of your qualifying earnings.
Your employer must pay 3% as a minimum and the remaining 5% is paid by you. Your contribution includes tax relief, so less than 5% will come out of your salary.
You're not legally required to pay into your pension, and your employer can't require you to.
If you're self employed, you're not required to pay into a pension. But not contributing anything, and relying on the state pension, is unlikely to be enough to fund your retirement.
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If you reduce your contributions, you could be giving up far more than you think.
Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown said people should bear in mind tax relief and employer contributions.
She told Which?: 'Over time this extra cash can significantly boost how much goes into your pension as well as how much you get at the end.'
Here's how they can boost your pension:
If you cut your contributions and no longer pay the 5% minimum contribution, then you could forfeit your employer contributions.
If you reduce your contributions below 5%, it's up to your employer whether they let you remain in the pension scheme.
You could risk losing that 3% employer contribution (effectively 'free money') altogether.
When you save into a pension, the government boosts your pension contributions via tax relief. Self-employed people also get tax relief.
This means that money you would have paid in tax on your earnings goes towards your retirement savings instead.
If you are a basic-rate taxpayer and were to contribute £100 from your salary into your pension, it would actually only cost you £80. The government adds an extra £20 on top – what it would have taken in tax from £100 of your salary.
Even if you’re not eligible for auto-enrollment or if you’re self employed, you can still benefit from tax relief if you pay into a personal pension.
Even reducing your pension contribution by a small amount can have a huge impact on your retirement.
Pension provider Aegon found a one-year pension break for a 25-year-old on average earnings of £29,000 and contributing the minimum amount in their workplace scheme, would mean they'd miss out on £4,600 at state pension age.
During this period they would forfeit workplace employer contributions worth £683. Their monthly saving from take-home pay would be only £75.
If pension payments were paused for two years, this could mean missing out on £9,100 and £13,600 for three years.
If you still want to cut your pension contributions, it's worth checking out the steps below first.
There may be other ways to make ends meet, so you don't need to take the costly step of cutting pension contributions.
Which? has set up a dedicated cost of living hub to give tips and advice on how to cut the cost of your household bills, essentials and make the most of your money.
The figures are £13,000 and £19,000 respectively for a single person.
You are also not able to take your state pension until you reach state pension age (SPA). This is currently 66 for men and women, but for those born after 5 April 1960, there will be a phased increase in . It's likely to go up further in future.
However, you can start taking money from your workplace pension earlier. Most pension schemes will allow you to take your pension from 55 (rising to 57 in 2028), unless they have rules stipulating another date.
Before making any major changes, it’s a good idea to discuss your options with someone else.
Kaya Marchant, pensions expert and the Money and Pensions Service told Which?: ‘If you’re worried about money, talk to your employer to see if you can lower the amount you contribute rather than stopping altogether.
‘Your employer only has to action a request to re-join a workplace pension scheme once every 12 months so check with your employer as to what you’re able to do before you make a decision.’
MoneyHelper also offers the Pension Wise service, where over-50s can get a free 45-60 minute appointment with a specialist to help you understand your options when you retire.
If you’re worried about debt of falling behind on bills and payments you also use its MoneyHelper Debt Advice Locator Tool.
If you decide to cut contributions altogether and leave your workplace pension scheme, you will be automatically re-enrolled every three years.
It’s a good idea to re-evaluate your decision as soon as your finances improve.
If you'd cut contributions, you may forget to increase them or get used to the extra money. Put a note in your diary or set a reminder on your phone.
If you decide to reduce your contributions then you can increase them at any point - just let your employer know in writing.