Research from financial planning firm Saltus found that 45 per cent of HWNIs had already seen an increase in the mortgage rates and payments while 39 per cent were expecting this to happen.
This was said to put a strain on their finances and retirement plans with 28 per cent confirming that they will or already have lowered their pension contributions as a direct result.
The Saltus Wealth Index found that people with assets of £250,000 or more were more likely to reduce their pension payments within the last six months. For those with assets of £250,000 or more, 14 per cent had done this compared to nine per cent of the wider population.
Those who have cut their payments have done so by an average of £1,246 a month or nearly £15,000 a year.
Saltus also found that HNWIs were underestimating how much they would need for a comfortable retirement. According to Retirement Living Standards, an annual income of £37,700 a year or a retirement pot of £932,500 is needed for a comfortable retirement.
However, respondents believed they would need an average of £578,313 to retire comfortably.
‘Cutting pension contributions a last resort’
Mike Stimpson, partner at Saltus said: “The fact that many HNWIs are cutting their contributions to help cover their mortgage repayments in the short term means their already too small pension pots could be at further risk.
“Pensions are one of the most phenomenal vehicles for growing your money. If you’re a higher-rate taxpayer, the potential tax saving is equivalent to a 72 per cent return just by putting the money into a pension. So, cutting contributions should be a last resort.”
Lifetime Allowance changes
Saltus said the government’s recently announced plan to scrap the Lifetime Allowance could help pension savers as they could now add more to their retirement pots.
Stimpson added: “The Lifetime Allowance changes announced in the Budget are welcome news for pension savers. We are likely to see many people review their pension contributions as a result – even more so if they’ve given up employer contributions in the past due to their LTA position.
“This could be a boon for people who may have underestimated how much they need saved away for their retirement.
“Another benefit of the LTA changes is that you can also backdate pension contributions by up to three previous years, including the year you’re in, meaning pension holders that had already reached the LTA could potentially be looking to invest up to £180,000 into their pensions in the next few months.
“However, we would urge people to be mindful that these rules could change again in the future and be sure to also consider other wrappers to maximise tax efficiency to help pave the way for a comfortable retirement.”
