Investment update - Coronavirus
15.04.2020
As has been widely reported in the press recently, there have been significant movements in the stock market over the past couple of weeks as a result of the global Coronavirus outbreak. 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.
Whilst over the course of the past fortnight there has been a significant fall in the markets, there has since been a further significant recovery over the past few days. It is expected that there will be further volatility over the coming weeks, but in the long-term markets will recover and continue to grow. Although your fund may have decreased in value in the short term, you may benefit from any further contributions you make whilst unit prices are lower which then increase in value later on.
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.
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.
The Pensions Advisory Service has published an article explaining the impact of the outbreak on pensions, which you may find useful
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:
In addition, the Financial Conduct Authority have also published guidance on their web site to help you spot and avoid a pension scam:
https://www.fca.org.uk/scamsmart
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