Money Minder UK

Cost-of-living squeeze: How much could a short pension break cost you?

In the last year, there has been a 400% increase in people searching for “pausing pension contributions” in the UK. There’s also been a hike of 467% in people searching for “should I stop paying into my pension”, according to Google search data. 

After a tumultuous few months economically, it’s clear that a growing number of people are concerned about their finances. For those who are still a while away from State Pension age, it might be tempting to pause your pension. 

Buying property, repaying debts and affording life events such as children and weddings can become more pressing, and in the short-term a pension pause may look appealing. However, the impact of doing this can extend further than you think. 

It’s wise to first fully understand your financial situation before making any big decisions about your pension. A pension drawdown calculator can look at your provisional pension income, and understand how long your pension pot can be used to provide you with an income in retirement. 

What might the impact of stopping your pension contributions for a while be? 

Squeezed savers could be turning to their pension pots or considering a pause due to rising inflation and the general high cost of living. 

It’s critical that anyone withdrawing from their pension considers the short and long-term effects of this, as it could put your retirement plan and income under strain. At least 17% of over 55s in the UK have admitted to having no pension savings, which can substantially affect your income levels once you arrive at retirement. 

Those pausing their pension may also have to work for longer than they planned to, to be able to afford their desired lifestyle. 

How could a short pension break affect me? 

If you stop contributing to your pension, your employer is no longer obliged to contribute at least 3%, too. Pension funds can also fluctuate, as any long-term investment can. Private pensions are often made up of a range of investments, with the aim of growing the value of your pot over time. 

Understanding how it affects you and your finances can be complicated, but there’s more to consider when making your decision than the initial amount you usually contribute each month. 

Generally speaking, using FCA prescribed investment growth rates of 5%, before inflation has been accounted for, helps to provide an understanding of just how expensive a pension break could be over the longer term. 

To understand how a pension break might affect you by retirement age, Money Minder took publicly available data on the average percentage of pension contributions by each age group, as follows: 

  • 22 – 29 – 7% of their earnings
  • 30 – 39 – 7% of their earnings
  • 40 – 49 – 7% of their earnings
  • 50 – 59 – 7% of their earnings
  • 60 – 64 – 5.5% of their earnings

Currently, automatic pension enrolment applies to workers aged 22 or over, while people will currently reach State Pension age at 66. However between 2026 and 2028, the State Pension age for men and women will increase to 67. And between 2044 and 2046, it will increase further to 68. 

Money Minder looked at the median gross salary for each group, before working out the qualifying earnings. 

Then it established an average annual pension contribution for each age group, depending on their taxable income and the average pension contribution each age group pays. An additional 3% was added based on the minimum employer contribution. 

A 5% pension growth value was also worked out, net of plan charges, depending on how many years left people have until they reach State Pension age. 

Just how much could a short pension break cost you? 

For those in their twenties, ceasing contributions for a year may save them £1,371. However, this can mean losing up to £5,778 from their total fund when they reach State Pension age, due to the accumulation of the investment returns contributing to the growth of the fund over the longer term. 

Age Average qualifying earnings Average employee pension contribution per year  Annual pension contribution (employer and employee)  How much could this be worth from your total pension fund?

























Similarly, for those in their thirties on a higher average salary, a saving of £1,885 in one year could add up to £6,598 by the time they reach State Pension age. 

These figures will vary depending on the income of the individual, but highlight the lasting impact of pension pauses and how sacrifices to your pension now can impact your lifestyle when you retire. 

Some people will retire earlier than the State Pension age too, while others may remain in paid work after they reach the qualifying age. 

Ray Black, managing director of Money Minder and Chartered Financial Planner, commented: 

“While it may seem like a good idea at the time, pausing your pension contributions or withdrawing money from your pot when you reach age 55 or over but before your state pension starts is likely to substantially reduce the value of it, either immediately, later on in life, or perhaps even both. This is especially true if after a pension break you fail to increase your contributions later on, too. In regard to drawing out a pension at age 55 or over but whilst you are still a long way away from your state pension age, I often find myself saying to clients: “Just because you can do something, it doesn’t mean you should”. 

“The cost of living crisis has exacerbated some people’s financial situation, and if you do feel like you have little choice but to suspend your pension contributions, it’s important to prioritise starting them again as soon as you are able to. Not only will it affect how much you have to spend in retirement, but it could also mean working for longer once you hit the State Pension age. It’s also crucial to seek independent financial advice no matter what your circumstances are, to avoid making an inappropriate decision instead of an informed one.”

For more information on your pension and details on the pension drawdown calculator from Money Minder, see here:

Always seek advice from a qualified Independent Financial Advisor (IFA) before making any decisions. Capital at risk. 


Money Minder looked at the current ONS data available on Annual Survey of Hours and Earnings (ASHE) for gross income, and defined benefit and defined contribution pension contributions by age group.

Age groups taken are: 

  • 22 - 29
  • 30 - 39
  • 40 - 49
  • 50 - 59
  • 60 - 64

Money Minder then used FCA investment growth rates, with inflation not yet accounted for, to understand how much each age group could be sacrificing once they hit state pension age, based on the average income and a year's pause in contributions. Money Minder based this on the difference in years between the oldest age in each group, and the age they will be able to claim the state pension. Google search data was taken from Google Keyword Planner.

Google search data was taken from Google Keyword Planner. 

[Data correct as of October 2022]

Please be aware these articles are for general information purposes only and correct at time of printing. We will not accept responsibility for any errors made or actions taken by any readers that have acted on the information contained. Answers given are for guidance only and specific advice should be taken before acting on any of the suggestions made. All information is based on our understanding of current tax practices, which are subject to change. Always remember when investing, past performance is not necessarily a guide to future performance and the value of some investment units can fall as well as rise.