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 defined contribution pensions. If you have a defined benefit pension, then any investment risk is borne by the employer. The state pension is unaffected by fluctuations to the stock market.
Making decisions about your pension based on short-term events and circumstances can have long-term consequences for your financial wellbeing and retirement. Before making any major decisions about your pension, it is important to get independent guidance or advice.
The financial support available in the current circumstances, (including your rights to sick pay, what benefits you can claim if you’re self-employed or not entitled to sick pay) is explained on the Money Advice Service website – please click here to visit.
The debt advice locator tool on the Money Advice Service website can help you find out where you can access free debt advice – please click here to access it.
If you're worried about the value of your pension
Pensions are long term investments, and although not guaranteed, values can go up over time. If you have several years before you're planning to draw on your pension, then there could still be time for your pot to recover from fluctuations in the stock market that occur in the short to medium-term.
I’m over age 55 and considering accessing my pension pot
Depending on when you're planning to retire or withdraw money from your pension, you may have to consider taking a lower income than planned. If you access your pension savings now, you might miss out on any increase in value if markets recover.
You can normally take up to 25% of your pension pot tax free, but if you take more than 25% there will be tax implications you will need to consider. Taking money from your pension may limit how much you can pay into a pension in the future.
It is important to consider all your sources of income before making decisions about your pension pot. If you take money from your pension, this could have an impact on your eligibility to access income-related state benefits such as universal credit and pension credit. For more information and help, please click here to visit the Money Advice Service.
Talk to us
The most important thing is not to panic and make rushed decisions before talking to someone who can help and taking independent guidance or advice. There are a number of options to access independent guidance and advice.
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're 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 (these are available to anyone over the age of 50). Please click here for more details of the Pension Wise service and details of how to book an appointment.
Alternatively, if you're 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.
Like anything valuable, your pension can become the target for illegal activities, scams or inappropriate investments. Scams can take many forms and can often appear to be a legitimate investment opportunity.
You may be tempted to cash in your pension. It isn’t usually possible for you to release cash from your pension pot before the age of 55 except in cases of ill-health or where you have a protected retirement age that is below 55. Some firms may offer to help you take your pension, this is called pension liberation. Whilst not illegal these firms take fees and you will have to pay a large amount in tax – in some cases like these people have been left with no savings for retirement. There is more information on our website on pension scams and pension liberation.
There are 4 simple steps you can take to protect yourself from scams:
- Reject unexpected pension offers whether made online, on social media or over the phone.
- Check who you’re dealing with before changing your pension arrangements – check the FCA Register or call the FCA helpline on 0800 111 6768 to see if the provider you're dealing with is authorised by the FCA.
- Don’t be rushed or pressured into making any decision about your pension.
- Consider getting impartial information and/or advice.
Please read information issued by the Metropolitan Police to avoid being a victim of Coronavirus vaccine fraud which can be accessed by clicking here.
If you have any concerns and would like to talk through some of these things you need to think about, please click here.
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.
I’ve been caring for a loved one, is there anything I should be aware of?
In order to receive a full State Pension when you retire, you must have paid National Insurance (NI) contributions for a minimum number of years. You may be able to get NI credits if you’re not paying NI. Credits can help to fill gaps in your NI record which may help to boost the amount of state pension and bereavement benefits that you’re entitled to. If you qualify for carer’s allowance because you look after someone for 35 hours a week or more, you’re automatically awarded credits. But if you’re over the age of 16, under state pension age and looking after one or more people for at least 20 hours per week, then you may be able to apply for carer’s credit to receive NI credits. Your income, savings or investments won’t affect your eligibility to claim this credit. You can find out if you qualify and apply by clicking here.
I work for the Scottish NHS, are there any changes that I need to be aware of?
The Health Secretary of Scotland has confirmed that all families of frontline Scottish NHS workers who die as a result of coronavirus (COVID-19) will receive financial support.
A lump sum of twice the staff member’s annual earnings and continued survivor entitlements will be provided in the event of a death in service. This benefit will be available immediately and backdated if necessary.
The majority of NHS workers are already eligible for this through their NHS Pension Scheme membership, but the Health Secretary wants to ensure that all NHS staff who provide frontline services will be covered for the duration of this crisis.
Changes to the Scheme Rules can be accessed here.
I have a Post Office Card Account (POCA) and I’m worried about going to the Post Office to collect my State Pension payments. Can someone collect my money on my behalf?
There is currently no disruption to the Post Office’s ability to provide POCA services. However, there may be changes to the branch that you usually use for these services. If your branch is closed, there will be a notice telling you which of your other nearby branches is open. You can access cash and balance services in-branch or using a Post Office ATM.
You can search for the nearest open branch using the branch finder on the Post Office website by clicking here.
If you are concerned about going into a branch, the Post Office want to reassure you that they are doing everything necessary to maintain safety in their branches.
You should not give your card and PIN to somebody else to use. You can nominate someone you trust to become a Permanent Agent on your account. This person will be given their own card and PIN to collect cash on your behalf. To nominate a Permanent Agent, please complete the ‘Permanent Agent access form’ (P6163), available from most Post Office branches. You can ask someone to take the form to the Post Office on your behalf as long as the form is complete and has been signed by yourself.
Alternatively, you can contact the POCA helpline on 03457 22 33 44 (Typetalk 03457 22 33 55) with urgent enquiries or to nominate someone to be able to use your card. To do the latter, you will still need to complete a form. Further details can be found by clicking here.
If you would like to give the Post Office details of a bank account to make your payments to instead, you should call 0800 085 7133 (textphone 0800 085 7146) between 9.30am – 3.30pm Monday to Friday.
If you have trouble getting through to the Post Office helplines, it is likely to be because they are experiencing a heavier than usual number of calls. Please try calling back at different times of the day.
The Post Office recently announced a partnership with DWP to supply cash directly to the door of some of their most vulnerable customers, initially in England, who are shielding because of risk of infection should they leave their home.
The DWP has initially identified 27,000 vulnerable customers, in England, who are shielding at home. They are proactively contacting people in this group to make sure they can still access their payments and let them know cash can potentially be delivered directly to their door. They will tell the Post Office who needs cash deliveries. The Post Office will then make sure money is sent to their home by special delivery, arriving by 9pm the following day.
My pension is invested in a with profits fund, how will changes in the stock market affect me?
With profits investment funds are offered by some insurance companies. They’re a form of managed investment that, unlike unit-linked funds, seek to smooth out the ups and downs of the investment markets.
A with profits fund usually invests in a range of different assets including equities, fixed interest, cash and commercial property. Most with profits funds are low to medium risk funds. If you take your pension prior to your selected retirement age then the value may be reduced – ask your provider for details.
I’m over the age of 55 and thinking of accessing the tax-free cash from my pension to pay off debts – what should I think about before I make a decision?
Before accessing your pension and taking your tax-free cash to you to pay off debts, you should ensure that you have considered other debt solutions available to you that mean you don’t have to use your pension in this way.
If you’re struggling with debt, it can be hard to know where to turn. But with lots of free advice services available, you can find help in a way that’s best for you. Please click here to visit the Money Advice Service for further information and help.
Should I pause payments into my pension scheme as I need the money to pay for essential living costs?
Suspending your pension contributions may seem like a good idea but it’s worth considering other ways of reducing expenditure if possible.
You currently benefit from tax relief on your contributions and if you're in a workplace pension then your employer pays in as well. Stopping your contributions means you’ll no longer get these extra savings. Some employers may allow you to reduce your contributions – you should check this with them.
If you do decide to pause your contributions, this will impact the income that you will have in retirement and you should try to make this pause as short as is possible. When you’re able to restart your contributions, you can ask your employer to opt you back into your workplace pension scheme and restart contributions. Depending on the rules of the scheme, you may have to wait up to twelve months before you will be able to opt back into the scheme.
What happens to my pension contributions if I’ve been furloughed?
If you have been furloughed, the required automatic enrolment contributions made by your employer will be covered by the government’s Coronavirus Job Retention Scheme. You will still need to pay the minimum contribution to get the government’s contribution. The amount you pay will shift in line with your new furlough pay figure.
The government will pay the minimum 3% automatic enrolment employer contributions based on your furloughed salary, which will be capped at £2,500 a month. Anyone earning above this amount could see their pension contributions drop significantly. If your employer usually contributes above the minimum, they should continue to make the correct contributions due under the scheme and in this case will have to pay a proportion of the pension contribution cost themselves.
What happens to my pension if my business/employer goes bust?
If your employer goes out of business – for example, it goes into administration, receivership or liquidation – and can no longer pay its pension contributions, the scheme you're in is separate to the assets of the company. Funds in the scheme can't be paid to the employer’s creditors.
For further information on what happens to your pension in this situation, please read our dedicated page here.
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.