With the economy at a standstill amid the coronavirus outbreak and subsequent lockdown, many of us are worried about their finances. With furlough, reduced incomes and even low-interest rates on savings – making the most of your money can be hard.
However, there are ways to boost your pension pot amid the uncertainty.
Joel Kempson, personal finance expert at money.co.uk said: “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.”
Have you found the right advice?
Take some time to plan what you want in the future and how your finances can get you there, setting goals for the future.
Mr Kempson advises: “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 if thinking about things like 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.
When you are 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 the value of your investments increase, reducing the impact of any short-term market volatility right now.
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What kind of pension do you have?
There are two types of pension, and both can contribute to your retirement but in different ways.
If you’re an employee, you may have a defined contribution pension scheme.
This means your payout will depend upon what you paid in and how well the investments have done.
So Mr Kempson advises: “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.
Are you thinking of buying an annuity?
You may be planning to buy an annuity, which are financial products you can buy with your retirement pot.
These then guarantee you a set income for the rest of your life.
The cost of getting an annuity is influenced by several factors, including the Bank of England base rate.
The Bank has recently reduced the rate to soften the economic impact of the coronavirus.
The base rate sets the level of interest all other banks charge borrowers and is currently at 0.1 percent.
This is likely to affect the cost of an annuity, and you may face additional charges as a result.
So as said above, it is worth getting independent financial advice from a trustworthy source before you buy an annuity.
Do you qualify for the state pension?
If you qualify for the state pension, it’s highly unlikely this income will be directly affected by fluctuations in the stock market due to coronavirus, as it is funded by the taxpayer.
State Pension can be claimed once a person reaches State Pension age, however, doesn’t have to be claimed straight away.
You can defer payments if you are still working, or if you have enough to live on for the time being.