Even with the best intentions, around two-thirds (67%) of people with persistent debt who make regular payments into an ISA or savings accounts say their debt has forced them to cancel or reduce these payments
According to research from Aegon, despite their best efforts, those with persistent debt find themselves having to reduce or stop payments into savings accounts. However nearly three-quarters of people (74%) said that even in the face of their debt they have continued to pay into a workplace pension.
Figures from the Bank of England indicate that household debt has reached its highest levels since the global financial crash ten years ago.
The research showed that debt caused 43% of people to stop or reduce payments into an individual personal pension and only 26% of people with a workplace pension chose to stop or reduce payments into their pension.
Half of those who were forced to reduce or stop payments to their workplace pension due to debt, stated that this meant they lost out on some or all of their employer contributions.
Steven Cameron, pensions director at Aegon UK, adds: “Many people will have periods where they have significant and at times persistent debt. While it’s important to have plans in place to remedy this, it’s also important to get into the habit of making regular pension savings. If an employer offers a workplace pension scheme, opting out could be a very damaging decision.”
When faced with debt, people are more likely to cut back on other spending than give up their pension contributions with the top three things people have cancelled being eating out, charitable donations and gym membership.
Jonathan Watts-Lay, director, WEALTH at work, comments: “It’s not uncommon for employees to face financial worries at various stages of their life whether that is dealing with spiralling debt, concerns over retirement savings or simply making the monthly budget work. This is clearly having an effect on the workplace – our latest research with Reward found that 66% of employers said that financial worries caused increased levels of stress, 44% said it resulted in lower productivity and 38% said that it lead to absenteeism due to personal financial problems.”
Watts-Lay continues; “Employers can help improve their employees’ financial wellbeing by providing them with the knowledge to make informed decisions by integrating a financial wellbeing strategy. This should include financial education and guidance to help employees understand how to maximise their workplace savings and benefits in the context of their overall financial position.”
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