Skip to main content
The Actuary: The magazine of the Institute and Faculty of Actuaries - return to the homepage Logo of The Actuary website
  • Search
  • Visit The Actuary Magazine on Facebook
  • Visit The Actuary Magazine on LinkedIn
  • Visit @TheActuaryMag on Twitter
Visit the website of the Institute and Faculty of Actuaries Logo of the Institute and Faculty of Actuaries

Main navigation

  • News
  • Features
    • General Features
    • Interviews
    • Students
    • Opinion
  • Topics
  • Knowledge
    • Business Skills
    • Careers
    • Events
    • Predictions by The Actuary
    • Whitepapers
    • Moody's - Climate Risk Insurers series
    • Webinars
    • Podcasts
  • Jobs
  • IFoA
    • CEO Comment
    • IFoA News
    • People & Social News
    • President Comment
  • Archive
Quick links:
  • Home
  • Sections
  • News

Hidden traps await pension savers opting out to make ends meet

Open-access content Wednesday 14th September 2022 — updated 12.55pm, Thursday 15th September 2022
ytd

Pension savers considering temporarily opting out of their contributions during the cost-of-living crisis could be ensnared by “hidden traps” that will leave them considerably worse off, according to an independent consultancy.

According to scenario modelling by Broadstone, people on a £35,000 salary with a 5% matched scheme who reduce their contribution by the full 5% would lose their employer’s contribution, as well as tax-relief.

While their usual total monthly pension contribution will be £291.66, including employee and employer’s contributions and tax relief, if they opt out they will reduce their employee contributions by £145.83 a month. However, Broadstone warns that they will not see all that money added to their net pay, as the loss of tax relief means they would only add £116.66 to their monthly salary. Losing the employer’s contributions means their total monthly pension contribution falls to zero, causing a total loss of £175 to their overall wealth every month.

“For some people, taking the decision to reduce or stop their pension contributions will be necessary as income pressures intensify,” said Broadstone’s head of pensions and savings Rachel Meadows. “However, pension savers should be aware that there are traps and consequences due to considerable employer and government incentives around pension saving. It is not as simple as recouping the pension outgoings on their pay-slip pound-for-pound into their salary.”

The consultancy calls on employers to hold group sessions for their staff which outline the benefits of pensions, especially in the wider lens of personal finances, and to annually “nudge” savers who have reduced their contributions to restore payments back to at least recommended levels

Broadstone also urges employers to be pragmatic and ensure that their contributions are not reduced if staff need to bring down their pension savings levels to meet cost-of-living challenges.

Filed in
News

You might also like...

Share
  • Twitter
  • Facebook
  • Linked in
  • Mail
  • Print

Latest Jobs

New Fast-Growing Team - Actuarial Systems Development

London (Greater)
Excellent Salary Package
Reference
143762

Actuarial Pension Consultant – Scotland/Remote – Up to £90,000 plus bonus

Edinburgh / Glasgow / Remote working
Up to £90,000 + Bonus
Reference
143761

Part Qualified Pensions Actuary– Specialised Pensions Consultancy - Scotland/Remote - Up to £70,000

Edinburgh / Glasgow / Remote working
Up to £70,000 + Bonus
Reference
143760
See all jobs »
 
 

Today's top reads

 
 

Sign up to our newsletter

News, jobs and updates

Sign up

Subscribe to The Actuary

Receive the print edition straight to your door

Subscribe
Spread-iPad-slantB-june.png

Topics

  • Data Science
  • Investment
  • Risk & ERM
  • Pensions
  • Environment
  • Soft skills
  • General Insurance
  • Regulation Standards
  • Health care
  • Technology
  • Reinsurance
  • Global
  • Life insurance
​
FOLLOW US
The Actuary on LinkedIn
@TheActuaryMag on Twitter
Facebook: The Actuary Magazine
CONTACT US
The Actuary
Tel: (+44) 020 7880 6200
​

IFoA

About IFoA
Become an actuary
IFoA Events
About membership

Information

Privacy Policy
Terms & Conditions
Cookie Policy
Think Green

Get in touch

Contact us
Advertise with us
Subscribe to The Actuary Magazine
Contribute

The Actuary Jobs

Actuarial job search
Pensions jobs
General insurance jobs
Solvency II jobs

© 2023 The Actuary. The Actuary is published on behalf of the Institute and Faculty of Actuaries by Redactive Publishing Limited. All rights reserved. Reproduction of any part is not allowed without written permission.

Redactive Media Group Ltd, 71-75 Shelton Street, London WC2H 9JQ