The predictions from administrators and a leading IFA follow data from the Office for National Statistics (ONS) that record a 400,000 fall in active membership of occupational pension schemes.
Administrators have so far been surprised at the resilience of member contributions in the face of worsening economic conditions.
Pat Wynne, director at Xafinity Consulting, said: “Perhaps somewhat counter-intuitively, we have not seen any drop in the level of contributions that employees are putting into their schemes.
“However, successive studies have shown that a key feature behind the reduction in voluntary savings is debt, and especially student debt, which is now at a peak.
Servicing debt is becoming more challenging and this may well flow through to even lower personal contributions.”
Darren Laverty, partner at Secondsight, an IFA that specialises in tackling employee inertia on savings, predicted that higher mortgage payments would be the main cause of any reduction in pension contributions.
“We predict over the next six months that as fixed-rate mortgage deals – which were originally set up in the second part
of 2006 – come to an end, mortgage payments are going to rise significantly. For example, the monthly payments on a £180,000 repayment mortgage are set to increase by around £150 a month, if comparing the best deals in 2006 to those available today.
“Suddenly, this £150 will have a real and sudden impact, and something will have to give. As a result, we are expecting a
few calls from members in the second half of this year asking to reduce pension savings.”
Laverty urged employers to remind employees why they are saving in the first place, and not to create new habits for themselves, which result in them not saving enough.
The ban on employers encouraging employees to opt out of personal accounts will hit those in debt the hardest, claims Mercer. A high proportion of the target group for personal accounts will have no savings at all and their ability to make precautionary saving will be limited.
