As revealed first by Money Marketing on Wednesday morning, the largest US credit card company suspended contributions to its UK stakeholder plan from July 1 in a bid to cut costs and maintain profitability in the challenging economic environment.
Axa Life’s Mark Rowlands believes the move could be harmful to the long-term wealth of employees.
He says: “While it may feel more palatable today for employees for their pension contributions to be reduced, it is actually much more harmful to their long-term wealth.”
Axa carried out research in late 2008 into the effect of a two year pension break. It revealed that a 28 year old contributing £300 per month into an individual stakeholder pension could be £59,7000 worse off at retirement if they took a two year pension holiday.
Rowlands says: “The point of a pension is to provide someone with enough money to retire with a lifestyle that they choose, based on how much they invest over their career. Regular payments, from early in someone’s career, make this more achievable.”