Pension contribution holidays and COVID-19

29 July 2020



We carried out a recent survey to understand how the pandemic has affected attitudes towards retirement planning.

The COVID-19 pandemic has wreaked havoc on the economy, with millions of people either furloughed or made redundant and stock markets plunging, leaving investors concerned about the value of their investments and looking to mitigate the damage.

These are all issues that can affect the pension market as people make knee-jerk decisions to cut or even stop, their contributions. While they may do this as a short-term measure, it can have a long-term impact on retirement planning.

Royal London survey

We surveyed 2,000 people to ask how the pandemic has affected their retirement planning.

The results showed that younger people were far more likely to have taken action, with 40% of those aged between 18-34 having stopped or reduced their contributions as a result of COVID-19.This compares to just 16% of those aged between 35-54. This may be because younger people are more likely to work in the hospitality and retail sectors, which have been more strongly affected by job cuts and furloughing staff.

An interesting insight from the research was that those participants with an ongoing relationship with an adviser were actually more likely to have amended their pension contributions as a result of COVID-19 – some 44% of those in this situation had done so. This may be down to a more active approach to money management among this group, as 90% of those without an adviser had made no changes.

Why make the change?

The key reason given for choosing to stop or reduce pension contributions was affordability, with 40% citing this as their main reason.

Again, younger people were most likely to have cut contributions due to affordability - 51% of those aged 18-34 cited this as their key reason. They may have been more likely to take action on their pension because they see retirement as being far away and feel they have plenty of time to make up for any lost contributions.

Interestingly, those respondents who had a relationship with an adviser also chose to stop or reduce pension contributions. However, the key reason given for doing so was stock market turbulence as opposed to affordability.

Resuming contributions is important

While it's understandable that people look at how they can budget during uncertain times, there are concerns that despite the best of intentions, people don't resume their pension contributions once things settle down. This risks lasting damage to people’s retirement income.

However, the respondents overwhelmingly said it was their intention to resume contributions relatively quickly, with 37% saying they intended to resume within three months and a further 16% saying they expected to do so within 6 months. Only 12% said they wouldn't resume their previous level of pension contribution, while a further 9% said they were unsure.


As the financial implications of the pandemic continue to unfold, it's likely people will continue to assess whether they should continue to contribute to their pension.

While taking a short break from contributing isn't likely to cause long-term damage to retirement prospects, it's vital that contributions are resumed as soon as possible.

Source: Royal London, June 2020.  

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The Royal London Mutual Insurance Society Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. The firm is on the Financial Services Register, registration number 117672. It provides life assurance and pensions. Registered in England and Wales number 99064. Registered office: 55 Gracechurch Street, London, EC3V 0RL.