With high living costs impacting groceries and travel to bills, you might be looking for ways to cut back and save money where you can.
One area where it could be tempting to do this is on your pension contributions. You might feel as though you have no choice - and that having enough money to pay for essentials like food and energy, will take priority over pension payments.
If you’re tempted to opt out of a workplace pension or stop contributions to a private pension, there are consequences to consider. While you may see a temporary boost to your income, pausing contributions, even temporarily, can make a big difference to your future retirement.
What will happen if I pause my pension contributions?
There are lots of factors to think about before pausing your pension payments. Here are some of the main considerations:
You may not have enough to live off in retirement - if you pause your pension contributions, you’ll have less money in your pension pot when you eventually come to retire.
You won’t benefit from tax relief - most UK tax payers get tax relief on their pension contributions. This is essentially free money from the government. Usually basic rate taxpayers usually get a 25% tax top up, so if you paid £100 into your pension, HMRC would effectively add another £25 which would bring the total contribution up to £125. Plus, higher and additional rate taxpayers can claim a further 25% and 31% respectively through their Self-Assessment tax returns. You can claim this tax relief on contributions up to the lower of £60,000 or 100% of your salary per year (2025/26). When you stop contributing, you stop benefiting from this tax relief.
You’ll lose money from your employer - if you’re enrolled into a workplace pension and you stop your contributions, payments from your employer will stop too. If you’re eligible for a workplace pension under Auto-Enrolment rules, a minimum of 8% of your qualifying earnings must go into the pension. This is made up of 5% from you and 3% from your employer. In some cases, employers will pay more. Stopping your contributions (and employer contributions as a result) is essentially giving up free money, as you can’t claim this money in any other way.
You’ll miss out on potential growth - pausing or stopping your contributions doesn’t just mean your pot will miss out on the money going in, you could also miss out on the potential growth of your investments and compound interest. Compound interest is the snowball effect of the money within your pot earning interest on the interest already gained.
Can I reduce rather than pause my pension contributions?
Instead of pausing your pension contributions you could reduce the amount you put into your pension. If it’s a workplace pension you’ll need to speak to your employer. It might be possible for your employer to increase the amount it puts in, for example, so you could lower your own contributions.
If it’s a private pension you’ll need to speak to your pension provider about lowering your contributions. You should be able to reach out to most providers online or by phone. If you’re a PensionBee customer, you have the flexibility to lower or increase your contribution amount as your needs and circumstances change.
How much do I need in my pension pot?
The amount you need to retire on will likely depend on your own situation so think about things like:
- what kind of lifestyle you’d like in retirement;
- whether you want to stop working completely;
- whether you have any dependents; and
- how much you have in savings or other assets such as property.
Pensions UK have a set of Retirement Living Standards which can help you work out how much you might need per year. For a minimum standard of living in retirement, you’d need a pension pot of £13,400 a year as a single person and £21,600 as a couple. A moderate standard is £31,700 for a single person and £43,900 for a couple while it’s £43,900 or £60,600 respectively for a comfortable standard.
While these are only guidelines, they’re worth considering and can help you figure out how much you’ll need to have saved to achieve your desired lifestyle in retirement.
With PensionBee’s Pension Calculator, you can work out how long your current savings could last. Use the toggles to adjust your retirement age, desired income and your contributions to see the impact on your pot. If you’re a PensionBee customer, you can use the Retirement Planner in your online account - just log in and tap through to the ‘Analytics’ tab.
Finally, it’s also worth considering the State Pension. If you qualify for the full new State Pension, you’ll currently get £11,973 per year (2025/26). Although the age at which you can claim is 66 and rising to 67 from 2028.
Can I temporarily stop paying into my pension?
Pausing your pension contributions is a personal decision and it’ll be related to your current life circumstances. You may have lost your job or have a big medical expense you weren’t expecting. It’s important to be aware before you do pause your contributions, that this will have a direct impact on your overall retirement pot. So before doing so, consider:
- contacting independent debt charities, such as StepChange for support; or
- lowering your contributions instead of stopping them altogether.
If you’re struggling financially and feel as though you have no other choice, you can contact your pension provider and fill in an opt-out form. This means no more money will be taken. But remember, you still can’t take any of the existing money that’s built up until you’re 55 (rising to 57 from 2028).
Rebecca Goodman is an award-winning Freelance Journalist. For the past 15 years she’s been working for national newspapers and magazines including The Guardian, The Independent, The Times, The Mail on Sunday, This is Money, and MoneySavingExpert. Her work is driven by wanting to help people to make their money work harder, exposing wrongdoing in the financial services industry, de-mystifying money issues, and sharing great easy money-boosting tips.
Risk warning
As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.
