Coronavirus - how will this affect my pension or investments?
Since the coronavirus outbreak, stock markets have fallen considerably and are likely to remain volatile for a while. You may therefore be wondering if you should bring forward a decision to do something with your pension.
Please note that the following information relates to pensions held in defined contribution arrangements. If your pension is held in a defined benefit arrangement, then any investment risk is borne by the sponsoring employer. The state pension is unaffected by fluctuations to the stock market.
If you’re currently paying into a workplace pension and have several years before you’re planning to draw on your pension, then there is time for your pot to achieve growth over the long term and recover from fluctuations in the stock market that occur in the short to medium-term. Historically, big stock market crashes usually recover in the following years.
You may wish to consider increasing your pension contributions to help make up for stock market losses. Every contribution you make is boosted by 20 per cent tax relief and if you’re a higher rate taxpayer you can get even more. Your employer may also match any increased contribution. A small increase in contributions could make a difference to your final pot size if it coincides with market recovery.
If you’re close to retirement or considering it within the next 5 years, you may have seen your funds lifestyled. This means your pension will have been moved into predominantly less risky funds such as cash, gilts or bonds. That doesn’t mean your pension won’t have taken a hit, but it should be less than if you had remained invested wholly in shares. Not all pension schemes offer automatic lifestyling so you should check what type of funds your pension is invested in.
If your pension is still invested mostly in shares, don’t panic. In time, markets are likely to recover. Depending on when you are planning to retire, you may have to consider taking a lower income or retiring later.
Talk to us
The most important thing is not to panic and make rushed decisions without knowing the facts and talking to someone who can help.
Before you make any big decision about your pension you have a number of options to access advice and guidance.
Firstly, you could talk to us here at the Pensions Advisory Service to discuss your situation further. Please click here for more information on how you can contact us.
Secondly, if you are aged 55 or over and considering drawing your pension, then you may wish to have a Pension Wise guidance session to fully understand your options. Please click here for more details of the Pension Wise service and details of how to book an appointment.
Alternatively, if you are looking for specific advice on which option, product and provider you should choose then you can always take regulated financial advice. Please click here for more information on choosing a regulated financial adviser.
Money guidance experts at the Money Advice Service are also available to talk you through any money problem, however big or small. You can contact them by phone, online or WhatsApp for free and confidential help. Please click here for further information.
Unfortunately the current situation around market uncertainty means we are hearing reports of people being encouraged or scammed into taking their money out of their pension pots. Taking this action without fully understanding the consequences is a significant risk. If you're worried and want to talk through some of the things you need to think about, click here.
If you would like to find a regulated financial adviser please click here for further information.
How is the current situation affecting my pension provider/scheme administrator?
The Coronavirus pandemic is placing huge additional pressures on the administration of pension schemes. We know that pension providers/scheme administrators are actively monitoring the situation, maintaining operations and have made changes to their working arrangements in line with Government guidance. Whilst many offices are closed, pension schemes will have processes in place to ensure benefits continue to be paid and are still being put into payment. Payments of benefits, retirement processing and bereavement services are being actively prioritised to ensure these vital services are maintained throughout this period.
With the virus affecting everyone, however, it is likely that things will take longer and we are hearing that there may be delays in response times, particularly in response to non-urgent requests. You may also find reduced ways to contact your pension provider/scheme administrator with many organisations unable to offer helpline services at this time.
If you have a general enquiry about the pension scheme/arrangement, we would recommend that you check the provider website, as the information you require may be readily available. Their website may also give you further information on any particular issues the administrator or provider is currently experiencing.
Importantly, please be aware that during this uncertain time there are some sophisticated fraudsters engaged in scams designed to trick members of pension schemes. The current volatility and uncertainty arising from the Coronavirus pandemic is a potentially lucrative environment for these scammers. Please be scam aware – click here for further information.
If you would like to discuss your situation with us, please click here for more information on how you can contact us.
Where can I find out more?
If you need more information, please contact us. A pension specialist from our team will be happy to help with whatever pensions-related question you have. Our help is always free.