Pausing pension contributions
When money feels tight, you might think about pausing your pension. It’s possible, but it can affect your future savings. Here’s what to consider and how to restart when you’re ready.
What does pausing your pension mean?
Pausing your pension means temporarily stopping your contributions. You won’t lose the money you’ve already invested, but without regular contributions, you may end up with less money to support you in retirement.
You’d also miss out on employer contributions and tax relief, which are valuable ways to help your retirement income grow.
Here’s an example of the possible long-term impact:
Sarah is 30 and thinking about pausing her pension contributions to help with day-to-day costs:
- She currently pays £150 a month into her defined contribution pension. This is matched by her employer. Her pension has an assumed annual growth rate of 5%.
- If she pauses for a year, she could have an extra £1,800 in take-home pay. But she’d miss out on £4,500 going into her pension, including employer contributions and tax relief.
- By the time she retires at 68, that one-year break could leave her with around £28,000 less in later life.
Things to consider before pausing
Before pausing your pension contributions, it’s important to understand how this can affect your retirement income.
How to pause and restart your contributions
If you’re thinking about pausing or restarting your payments, it helps to understand how the process works.
Speak to your employer or payroll team
Your employer will handle this through payroll and can pause your payments for you.
Check when you can restart contributions
Every employer is different. Some let you restart at any time. Others only allow changes at certain points in the financial year. It’s helpful to check this before pausing your contributions, so you can plan ahead.
Before you decide to pause your contributions
It’s important not to rush decisions about your pension. This checklist can help you make the right choice for you and your financial future.
You may be able to reduce your contributions instead of pausing them completely. Your employer can let you know what’s possible.
There’s usually a legal minimum that must be paid in by you and your employer. Ask your employer if they can increase their contributions if you reduce yours. You should also check whether they’ll stop paying in if you pause your own payments.
Take a look at your current savings and consider how a pause might affect your future income. Our retirement planner helps you work out how much you’ll need for the retirement you want.
Work out whether pausing will make a real difference to your take-home pay. Remember, stopping your contributions may increase your tax, National Insurance or student loan repayments. Check whether you’ll really be much better off in the short-term.
Consider how long you might need to pause for. If it’s only a short break, you may be able to use savings instead.
Restarting your pension contributions
Ready to start saving again? It’s simple:
- If you’re an employee: Tell your employer you want to restart. If you can’t restart payroll contributions immediately, you can make personal contributions in the meantime. These will go straight into your pension and allow you to keep saving until your payroll contributions resume.
- If you contribute directly: Complete our Personal pension contributions form.
