Joel Kempson, personal finance expert at money.co.uk says “COVID-19 has created turmoil in global financial markets, hitting many people’s pension pots. Combined with job losses, reduced incomes and low saving rates, it means now is an incredibly worrying time for anyone hoping to retire in the near future.
“Even though around 1.5m workers in the UK over 50 have said they will need to delay their retirement plans due to the pandemic, there are still some steps you can take to help get your retirement savings back on track.”
Take the time to think about what your financial goals are without letting panic about the present 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.
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.
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.
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.
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, including Universal Credit, New Style Jobseeker’s Allowance and New Style Employment and Support Allowanceq
You could have at least one of two types of pension, but both fund your retirement in different ways. 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.
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.
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.