Investment Update - Coronavirus
28.02.2022
Back in April 2020 as the Coronavirus Pandemic was taking hold, we provided an update on the impact that significant movements in the stock market might have on your pension. Here we provide a further update a year on.
Since April 2020, markets have recovered considerably, but are likely to remain volatile for a while as the pandemic progresses. The impact that this may have on your pension will depend on the type of pension you have, and how close you are to retirement.
If you are a member of the Defined Contribution Section, both you and the company pay a set level of contributions into your Pension Account while you are employed. These contributions are used to buy units in your chosen investment fund, which go up or down in value depending on the performance of your fund. When you reach retirement age, the value of your fund can be used to provide you with a cash lump sum, purchase an annuity (a contract with an insurance company that pays you an income for the rest of your life), or use more flexibly (by transferring your benefits to a drawdown arrangement that would allow you to take a series of lump sums or a regular income).
It is important to remember that pension savings are a long-term investment. If your savings are invested in a Target Date Fund and you are in the early/mid-life stages of your investment journey, your fund will be invested in higher risk funds to achieve growth over a long period of time. In these stages you can expect to see bigger ups and downs in the value of your account day to day, but in the long term your fund will increase in value.
If your savings are invested in other funds on the investment platform, the extent that your funds’ value is affected by the recent market movements will depend on the type of fund that you are invested in.
If you are close to retirement and invested in a Target Date Fund, your fund will be invested in less risky funds to protect your fund value, but it may still increase or fall in value. It is therefore important that if you are considering taking retirement within the next 6 months, that you consider carefully the timing of when you disinvest your pension fund.
If you are a member of the Defined Benefit Section of the Scheme, you will be provided with a certain level of income when you retire, based on the length of time you have paid contributions to the Scheme and your pensionable earnings close to retirement. Any investment risk is borne by the Company, not the member, although if you have made any AVCs in the defined contribution section these would be exposed to market movements as explained above.
State Pension
The State Pension is unaffected by fluctuations in the market.
Further Information
The Trustees are in regular dialogue with their Investment Managers to continually review the current situation and take action if needed. Further updates will be provided on the web site, so please check back.
In addition, unfortunately the pensions industry is already finding scams related to the outbreak being reported. The Pensions Regulator has produced a leaflet which gives useful guidance on how to avoid scams:
https://www.thepensionsregulator.gov.uk/-/media/thepensionsregulator/files/import/pdf/16423_pensions_consumer_leaflet_screen.ashx
The MoneyHelper service has also published guidance on their web site to help you spot and avoid a pension scam:
https://www.moneyhelper.org.uk/en/money-troubles/scams/how-to-spot-a-pension-scam
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