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Coronavirus: Getting your retirement savings back on track

COVID-19 has created some turmoil in global financial markets, hitting many people’s pension pots. Here are some tips to help you work out what to do about your pension in these circumstances.

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As things change rapidly during the coronavirus (COVID-19) crisis, this guide will be updated regularly to reflect changes in rules and regulations.

Has coronavirus hit your pension? 

Stock markets around the world have been hit by the economic disruption from the virus. 

Very few large companies will have escaped these stock market falls. This is because stock markets are where small slices of ownership shares are bought and sold. 

The state of the wider global economy also has an impact on stock market prices. The Office for National Statistics (ONS) released figures showing that the UK economy is now 24.5% smaller than it was in February.

This market volatility has had at least some impact on most people’s pensions and retirement savings, as many of these will be invested in the stock market.

Large companies in sectors like travel and firms that own and rent out office space are some of those who have suffered badly on the back of the virus’s impact. 

For example International Workplace Group (IWG Plc), a multinational company that rents out commercial office space through brands like Regus and HQ, has seen its share price plummet by just over 27% since the start of March. 

If you contribute money into a company pension scheme or your own personal pension, it is possible that some of these schemes will have invested money in stocks which have seen their value reduced in the short-term. 

Thankfully, the value of shares bought and sold on global stock markets have since begun to rebound, but the situation remains volatile. 

Most pension schemes have online platforms where you can see how your pension investments are performing and how much money is in your pot.

Getting the right advice 

While this guide is designed to help give you an understanding of the possible impact that COVID-19 may have on your retirement income, please do not treat this as advice. 

Take your time and think about what your financial goals are, and crucially don’t let panic about the situation right now drive your decisions for the future. 

Any decision about your pension may have long-term consequences on your retirement income, so you should think about getting independent advice from a qualified financial advisor.

Sites like Unbiased.co.uk and VouchedFor can be good starting points to find affordable and independent advice. This is especially helpful when thinking about things like the tax implications of any decisions relating to your pension pot. 

You can also get information and free planning tools from The Pensions Advisory Service (TPAS). TPAS is a government-run body which gives information and guidance to members of the public on their company, personal and state pensions.

Read more about finding an independent financial adviser you can trust.

When are you planning to retire?

If you are not planning to retire for a few more years there may still be time for your retirement funds to recover any immediate losses related to coronavirus disruption. 

So, you do not necessarily need to be concerned about what the short-term impact of coronavirus will be on the value of your savings.

Remember, pension pots are designed to be long-term investments. Over several decades it’s possible that the value of your investments increase, reducing the impact of any short-term market volatility right now. 

Are you aged over 55?

If you’re aged over 55 and you’re planning on getting access to your pension soon, you may have to think about taking a lower income than you had originally planned. By leaving more in the pot now, it is possible that you’ll be able to benefit from future increases in the value of your investments.

Are you thinking of buying an annuity?

You may be planning to buy an annuity. Annuities are financial products you can buy with your retirement pot which guarantee you a set income for the rest of your life.

The cost of getting an annuity is influenced by a number of factors, including the Bank of England base rate. The Bank has recently reduced the rate in order to soften the economic impact of the coronavirus.

This is likely to affect the cost of an annuity, and you may face additional charges as a result. Again, it’s worth getting independent financial advice from a trustworthy source before you buy an annuity. 

Read more about how annuities work.

Have you lost your job?

If you are aged 55 or over and you’ve been made redundant due to COVID-19, it could be tempting to start drawing on your pension as soon as possible.

But think carefully before you do this. If you weren’t planning on withdrawing money from your pension at this point you should think about what other short-term options are available.

The longer you can reasonably hold off taking your pension the more time there will be for your pension investments to potentially increase in value after any coronavirus- related fall.

You may be entitled to financial support from the government through at least one of several benefit schemes. 

These include:

  • Universal Credit

  • New Style Jobseeker’s Allowance

  • New Style Employment and Support Allowance

Read the UK government guidance for full details on applying for these benefits.  

What kind of pension do you have?

The action you may want to take could depend on the kind of pension you’re saving into. Here we’ll take a quick look at different options based on the type of pension you have.

You could have at least one of two types of pension, but both fund your retirement in different ways.

Defined contribution scheme

If you’re an employee, it’s possible that you have a defined contribution pension scheme. This means your payout will depend upon what you paid in and how well the investments have done.

It may be worth speaking to your employer about what the current situation may mean for your pension savings. They should be able to talk to the organisation that is managing your pension fund, to find out what they are doing to deal with the situation.

Defined benefit scheme

If you’re part of a defined benefit pension scheme, the risk of loss from any investments from the scheme is your employer’s problem, so you should have less to worry about.

For more information, read our guide on defined contribution and defined benefit pensions

Self-invested personal pension 

A self-invested personal pension (SIPP) is a way for you to directly invest your own money for your retirement. 

If you’re not sure how your investments have been affected, you should consider speaking to an independent financial advisor.

State pension

If you qualify for the state pension, it’s highly unlikely that this income will be directly affected by fluctuations in the stock market due to coronavirus, as it is funded by the taxpayer.

Read more about how the state pension works.

Find the best personal pension plan to make your money work as hard as it can.

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