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Cost of living crisis: mixed news about pensions and mortgages

As we look forward to 2023 (or not) there’s mixed news from key providers about pensions and mortgages.

In a new survey of 2000 employees reported by The Times* the Pensions Management Institute has found 1 in 5 has either opted out of their pension plan or asked to make lower contributions.

The reason is a need to release cash to cover essential bills. The paper explains:

“Lower-paid employees on £20,000 a year can boost their take-home pay by about £550 by opting out, but they miss out on parallel contributions from their employer plus tax relief, so have less to put away for retirement. Employees on higher pay can boost their take-home pay by more.” (our emphasis)

On all sides of the pensions debate there will be real disappointment if the cost crisis diminishes the success of automatic pension enrolment since its introduction in 2012.

Mortgage forbearance

Meanwhile another development at least offers hard-pressed families short-term respite.

Leading banks, the Financial Times** reports, have agreed with ministers ways they will help borrowers struggling with mortgage payments. Among the participants are HSBC, Barclays, LLoyds Banking Group and Nat West.

“Some measures could include switching mortgage holders to interest-only deals or moving them on to competitive fixed-rate deals without having to take another affordability test.”

Support measures ‘not enough’

Just before Christmas we noted Citizens Advice at local and national level warning that government support would not be enough to get many people though a cold winter.

We will continue to do everything possible to help people in difficulty and use our real time data to alert government and the public to the expected need for additional support.

* Millions halt pensions to pay their bills amid rising cost of fuel and food, The Times, 29/12/22

** UK banks to ease pressure on mortgage holders as late payments set to surge, (££) Financial Times, 28/12/22

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