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Your Money: SIPPs worth considering after sharp fall in employers’ pension contributions

Money experts say now is a good time to review your pension options after figures showing UK employer contributions fell by 5% in the first three months of 2021.

The quarter-on-quarter decline was highlighted in the latest Financial Survey of Pension Schemes, from the Office for National Statistics (ONS).

Less cash going in the kitty

According to ONS, the drop was primarily driven by employers putting less cash into topping up their defined benefit funds.

But there was also a 2% rise in the number of people paying into workplace pensions, while employee and employer contributions also rose.

James Andrews, senior personal finance expert at money.co.uk, said: “Pension contributions have been massively affected by Covid-19, just like many aspects of our day-to-day lives.

Total contributions up

“But it’s also good to see people paying in where they can, with more people paying into a workplace pension and a rise in total contributions too.

“And it’s money well spent in most cases, with early pension contributions having longer to grow.

“Workplace pensions are also topped up by bosses, seeing workers earning more than £10,000 a year offered at least an extra 3% of their salary to pay into a pension as long as they pay in 5% themselves.”

Pension options

Mr Andrews added: “If you want to save more than this, some employers will let you add extra voluntary contributions on top.

“Alternatively, you could take matters into your own hands and open a self-invested personal pension  (SIPP).


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“You won’t get a top-up from your boss, but you will get a tax break on the first £40,000 you save a year until you start drawing money from your funds.”

With a SIPP, you pick a company to invest in, choose which funds or assets you want to invest in and how much to put in each one, and then manage the pension online.

You are responsible for the performance of your pension, so it is important to spend time studying each fund before you start investing.

Mr Andrews said: “All direct contribution pensions carry an element of risk, due to them being investments, but a Self Invested Personal Pension could be considered a greater risk due to the fact the decisions are all up to you, as opposed to a fund manager or similar professional.

For the long-term

“However, it is worth remembering that a pension is a long-term investment and as such the higher rewards associated with shares and investments may outweigh short-term losses.

Pensions for many of us are a daunting prospect but, regardless of your situation, there are experts who can assess your individual situation and advise you on your options.”

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