With coronavirus having caused a sharp drop in share prices, particularly in the period between late February and late March 2020, seven organisations have collaborated to produce a guide for pension savers who may be worried about their pension pot. These organisations are:
- Financial Conduct Authority
- Financial Ombudsman Service
- Financial Services Compensation Scheme
- Money and Pensions Service
- The Pensions Regulator
- Pension Protection Fund
- The Pensions Ombudsman
Introducing the guide, Pensions Minister Guy Opperman MP said:
“I would urge anyone considering making changes to their pension to think carefully and to avoid making rash decisions.”
The nation’s financial advisers could certainly have a role to play here in re-assuring their clients. No-one with any form of equity-based investment will have been able to escape the stock market crash that developed as the pandemic took hold, but share-based investments have always delivered the best long-term returns. As of early July, the FTSE 100 had partially recovered, with the rise since the end of March comprising more than 50% of the earlier Covid-related decline.
For those who were close to their intended retirement date though, there can be no denying that coronavirus has had a significant financial impact, and many are now facing the choice of accepting a lower retirement income or delaying their retirement.
The guide also warns consumers about the threat of scams, and the authorities are concerned that the present uncertain situation could lead to more people being persuaded to either cash in their pension or accept an offer to transfer it elsewhere to somewhere where the promised returns are just too good to be true. The FCA warns consumers that a cold call offering a pension review from a firm that an individual has not dealt with previously is highly likely to be a scam. It also advises consumers that they can check if a firm is legitimate by searching the Financial Services Register, or by phoning the FCA’s helpline. Even if a firm shares the same name as one on the Register, this is not itself a guarantee of authenticity, as there is a growing problem with ‘clone firms’; so the FCA says consumers should ensure they use the contact details given for the firm on the Register, rather than any different details that the caller might provide.
In their section of the guide, TPR says that the average amount lost in a pension scam is £82,000 and that some have lost their entire life savings.
TPR also say that, for the foreseeable future, anyone who is looking to transfer their benefits out of a defined benefit pension scheme will be sent a new warning letter – signed by TPR, the FCA and MAPS. It says transferring out of a DB pension is unlikely to be in the individual’s long-term interest.
For the millions of employees who have been furloughed, they should continue to contribute to their workplace pension scheme, if at all possible. If they do so, then employer contributions will still be made to the pension scheme, except it will now be the Government that does this, via the Coronavirus Job Retention Scheme. The government will pay the minimum 3% employer contribution based on the furloughed salary, which is capped at £2,500 a month.
The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware of the facts, circumstances or legal position may change after publication of the article.