The lack of jobs and income losses during the crisis has meant that low earners have missed out.
A new report has highlighted that the lowest earners in the UK have missed out on an estimated £122m worth of employer contributions, likely brought on by the pandemic.
As part of Scottish Widows’ latest Retirement Report, the lack of funds was sparked by job and income losses seen during the crisis, with many pension savers now faced with the difficult decision of paying bills and saving fur their future.
The report revealed that 31% of low-income earners, which is defined by those earning £10-20,000 per annum, have experienced a financial decline because of the pandemic, with one in five experiencing a drop in income.
It found that 23% now expect to have to “work until they drop”, while over half shared concerns about running out of money completely.
As a result of these figures, the pension provider is now calling for urgent reforms that would entitle those on low incomes to continue to receive contributions form their employer, even if they are unable to meet the costs of their own employee contributions during periods of financial uncertainty.
Pete Glancy, head of policy at Scottish Widows, said: “Covid-19 has had a massive impact on the nation’s finances, particularly on those who were already struggling financially.
“Those working from home have benefited from reduced commuting costs and everyday expenses, allowing them to boost their savings. But those on lower incomes – and less likely to have worked at home during the pandemic – have seen their finances hit hard and are leaning on savings to cover bills and short-term needs.”
Saving for retirement improves
There is some optimism following the report however, as people saving for retirement – those putting away the recommended minimum 12% – reached a record high of 61% this year.
It seems this progress has been boosted by young savers, as six percent more 30 to 39-year-olds are now saving adequately compared to last year.
Despite this, the positive impact of auto-enrolment appears to have plateaued in recent years, which Glancy stated as a result we are “unlikely to see the number of people saving dramatically increase in the years ahead”.