One in five people have cut pension contributions or stopped saving for retirement due to tighter household budgets, research reveals.

Men, younger people and higher earners are the most likely to have pared back or axed pension contributions altogether, despite the serious damage this inflicts to their long term finances.

Inflation also means people need to save up even bigger pensions than ever to fund a decent old age.

Some 14 per cent of people have stopped saving into their pension and 8 per cent have cut contributions, according to the survey by Hargreaves Lansdown.

But 25 per cent of men have done this, versus 18 per cent of women. And 31 per cent of 18 to 34-year-olds have retrenched, compared with 20 per cent of 35 to 54-year-olds, and 17 per cent of those aged 55-plus.

Wealthier people are more likely to have cut back, despite the Government making pension tax relief allowances more generous for the better off in the last Budget.

The Hargreaves survey found 35 per cent of additional rate income tax payers (earning £125,140-plus – see box below) have stopped or cut back contributions.

Some 38 per cent of higher rate taxpayers have done so, and 18 per cent of basic rate tax payers.

‘One potential explanation could be that higher earners are more exposed to the high mortgage rates we are seeing at the moment and are more likely to have variable rate debt so may now be in a position where they now need to cut back,’ says Helen Morrissey, head of retirement analysis at Hargreaves.

Meanwhile, some 62 per cent say they have not changed their approach to pension contributions.

Hargreaves surveyed some 2,000 adults, weighted to be representative of age, income and geography.

What damage can halting pension saving do to retirement funds?

Opting out of pension saving for five years in your 20s can blow a £114,000 hole in your eventual retirement pot, and failing to make payments for 10 years will lose you a staggering £202,000, according to one study.

It focused on delays in your 20s, which have a big knock on effect due to the loss of compound growth – returns on returns – which needs time to make itself felt.

However, gaps will have a lasting impact at any point in your life, unless you can make an effort to fill them later.

Those who have no choice but to stop paying into pensions to pay food bills and keep a roof over their heads are urged by money experts to treat this as only a temporary solution, until their financial situation improves again.

‘Rising prices have made balancing budgets a real struggle and it’s no surprise that, after making all the cuts they can elsewhere, people are turning their attention to their pensions,’ says Morrissey.

‘Such actions are understandable – keeping up pension contributions is extremely important but, given the enormous pressure our finances have been under for such a sustained period of time, it makes sense if people are prioritising the here and now.’

How do you get your pension back on track if you stopped or cut contributions?

Helen Morrissey of Hargreaves Lansdown offers the following tips.

1. Make sure that, when things get better, you resume your pension contributions as soon as you can.

Make a note in your diary at a regular interval to remind you to assess whether you can afford to restart, otherwise it may be something you don’t get round to doing.

2. Auto-enrolment means you will be re-enrolled every three years but, ideally, you don’t want to spend three years not saving for retirement unless you really must.

It also won’t pick up those people who have cut their contributions rather than stopped them and face being stuck at a lower contribution level for longer than they had planned.

3. Increase contributions if you receive a pay rise or get a new job.

Doing it straight away means you don’t get used to having the extra cash.

4. It’s also worth checking whether your employer operates a matching system where they will boost their contribution to your pension if you increase yours.

This can really help you rebuild your pension planning after a difficult time.

How to sort out your pension if you fear it’s falling short

1) If you are worried about whether you will have saved enough, investigate your existing pensions. Broadly speaking, you need to ask schemes the following questions.

– The current fund value.

– The current transfer value – because there might be a penalty to move.

– Whether the pension is in a final salary or defined contribution scheme. Defined contribution pensions take contributions from both employer and employee and invest them to provide a pot of money at retirement.

Unless you work in the public sector, they have now mostly replaced more generous gold-plated defined benefit – career average or final salary – pensions, which provide a guaranteed income after retirement until you die.

Defined contribution pensions are stingier and savers bear the investment risk, rather than employers.

– If there are any guarantees – for instance, a guaranteed annuity rate – and if you would lose them if you moved the fund.

– The pension projection at retirement age. You can use a pension calculator to see if you will have enough – these are widely available online.

2) You should add the forecast figures to what you anticipate getting in state pension, which is currently £203.85 a week or around £10,600 a year if you qualify for the full new rate. Get a state pension forecast here.

3) If you are tempted to merge your old pensions, read our guide first to ensure you won’t be penalised.

4) If you have lost track of old pots, the Government’s free pension tracing service is here.

Take care if you do an online search for the Pension Tracing Service as many companies using similar names will pop up in the results.

These will also offer to look for your pension, but try to charge or flog you other services, and could be fraudulent.

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