Retirement savers are more concerned with repaying debt or covering day to day living costs than increasing their pension contributions.
Almost two-thirds say they would ease their financial stress if they had some extra cash rather than put the money into a pension.
Less than a fifth facing a struggle to keep on top of their bills would increase their pension savings, according to a survey of financial advisers by financial firm Royal London.
The company asked 150 financial advisers about the financial challenges facing their clients.
The result revealed just over a third agreed their finances were so tight they could barely meet day to day expenses even though almost nine out of 10 knew they should be saving more for their retirement.
Feeling the squeeze
Half also said that they would prefer to save into an ISA as the money was more easily accessible, while a third would opt for a pension.
Fiona Tait, Pensions Specialist at Royal London, said: “While our findings show that many people are feeling the squeeze, it is good news that advisers think their clients are engaged with retirement savings. Even if people can’t afford to save more now, it is possible to create a definite plan of action to save more in the future when their income increases or outgoings are reduced.
“For many the level of saving into pensions is well below the level it should be for them to achieve a realistic income for the lifestyle they imagine when they choose to retire. 35-44 year olds are particularly vulnerable, as they are less likely to have a direct benefit pension to fall back on.”
Diverting money to a pension
Tait explained how spending less on borrowing and more on savings could affect retirement income.
On average, those with short-term financial commitments pay an average £200 – £299 a month for two to three years. If they paid £100 into a pension until they decided to retire, they could add nearly £40,000 to their fund.
Those with long term personal borrowings, such as loans or credit cards expect to pay these off within four years. If they paid between £100 and £199 into a pension, the fund would be worth an extra £18,600 on retirement.
Home buyers expect their mortgage to be paid off within the next 20 years. This could free up around five years of payments, which on average are £500-£599 a month, boosting their pension by £20,000.