Employee contributions fell to £5.26bn in 2008-09, from £6.29bn the year before. This is only the second time that contributions have fallen since records began in 1990. In 2001-02, contributions dropped by £40m.
Hargreaves Lansdown says a collapse in saving of this magnitude will undoubtedly have repercussions down the line unless savers make good their missed contributions.
Pensions analyst Laith Khalaf says: “The new Government could do its bit by introducing greater flexibility in how and when you can draw on your pension. As things stand individuals are understandably reluctant to put money away for their retirement when their immediate future looks uncertain.”
But HMRC figures also revealed that employer contributions have almost doubled since pension contribution limits were increased in April 2006, from £4.07bn to £7.71bn. Employees were upping their contributions also until 2008-09, with contributions rising by a third from £4.74bn to £6.29bn.