More than nine in 10 (93 per cent) high net worth individuals (HNWI) have seen their lifestyle and financial planning impacted by the current higher interest rate environment and continuing rise in the cost of living (CoL), analysis from Saltus has found.

Its Wealth Index Report showed that the most common change made by HNWIs in response to rising costs was to cut down on personal spending (16 per cent).

Furthermore, a “worrying” 11 per cent had reduced their pension contributions, which Saltus warned put their retirement plans at risk.

According to the research, HNWIs were already falling short when it came to pensions, with the “vast majority” underestimating what they would need in their pension pot for a comfortable retirement.

On average, HNWIs believed they would need a pension pot of £471,198 to give them a comfortable retirement, but Saltus stated they were likely to need retirement savings of £789,950, plus the full state pension.

Saltus found that the average value of respondents’ pension pots was currently £424,259 and just 3 per cent of HNWIs were making use of the full £60,000 annual allowance.

The average amount contributed was £2,639 per month (£31,664 per year), but more than one in five (22 per cent) were saving less than £1,700 a month into their pension.

Commenting on the findings, Saltus partner, Mike Stimpson, said: “The fact that many HNWIs are cutting their contributions to help cover rising costs in the short term means that they are making it tougher to establish a pension pot that will fund a comfortable retirement.

“For a comfortable retirement, it is estimated that a single person needs £43,100 a year, and to achieve that you’d need a pension pot of £1,077,500.

“Even with the full state pension – currently £11,502 a year – you’d still need almost £800,000 in your pension to make up the shortfall. So, most high net worth individuals are underestimating what they’ll need by almost £320,000.

“Pensions are one of the most phenomenal vehicles for growing your money. If you are 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.”

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