The Pensions and Lifetime Savings Association (PLSA) has published this guide to explain what happens to your workplace pension under a range of circumstances brought about by the virus and provides tips on what to do about your pension.
Julian Mund, Chief Executive, PLSA, said: "People have been facing up to wide range of work disruption including school closures, remote working, reduced hours, enforced holiday, being furloughed and, in some cases, even being laid off. Market volatility and uncertainty over employment may prompt you to look at your short and long-term household finances. You might be worried about paying your immediate bills, or worry that your pension payments might stop.
"In the majority of cases the best action is to stay the course with your workplace pension. Past experience suggest that share and other asset prices will recover over time. For people in a defined contribution scheme who are close to retirement, it may be necessary to take stock of when you plan to retire and how much income you can expect to have. Seek guidance or financial advice if you are unsure what to do."
TOP TIPS AT A GLANCE
• Retirement benefits for those with defined benefit pensions are not directly affected by stock market movements resulting from Covid-19. In cases of employer insolvency, defined benefit pensions are protected firstly by having a ring-fenced fund and secondly by the Pension Protection Fund.
• Your savings in defined contribution schemes are also ring fenced from your employer’s assets, and in addition are generally protected against insolvency of the pension provider. The funds are well diversified to weather the worst of falling share prices and benefit from a future recovery.
• In the majority of cases the best action is to stay the course with your workplace pension. Past experience suggest that share and other asset prices will recover over time.
• Think very carefully before deciding to stop contributing to your workplace pension – you could miss out on employer and government contributions to your pension, growth to your pot from a future stock market recovery and even death benefits associated with your scheme.
• For people in a defined contribution scheme who are close to retirement, it may be necessary to take stock of when you plan to retire and how much income you can expect to have. You should consider getting free government advice from the Pensions Advisory Service or Pension Wise.
• Furloughed employees could get 80% of wages, up to a monthly cap of £2,500, under the Government-backed Coronavirus Job Retention Scheme plus 3% minimum statutory employer automatic enrolment contributions.
• Be wary of criminals who may try to scam you out of your pension. Be especially careful of cold calls asking for your pension information or offering you unusually high investment returns or urging you to act by a short deadline.
• With both types of pensions, like with wills, it is worth checking that your nominated beneficiaries have been updated to reflect your family circumstances and your wishes.
• Seek guidance or financial advice if you are unsure what to do.
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