There’s no denying the UK’s economy has taken an unprecedented hit due to the current lockdown, with experts predicting the fallout will be worse than the 2008/2009 financial crisis.
With global stock markets down, workers’ pensions are also affected, but how much depends on what type of pension scheme individuals are enrolled in.
Stuart Price, Partner and Actuary at Quantum Advisory, considers what might happen pension-wise in the country when businesses get back on their feet.
Stuart comments: “How people’s pension arrangements are affected will depend on several factors including how far they are from retirement, how much and how long they have been saving for and what type of pension scheme they are in.
“Individuals in their twenties, thirties or forties shouldn’t have too much to worry about as fluctuations in the short term are less likely to have a lasting impact on the final value of their pension. They are still relatively young with a good thirty or forty years left to contribute into their pension arrangement so should sit tight and wait for things to get back to ‘normal’.
“Those approaching retirement will be separated into two sections; those in a defined contribution scheme (DC) and those in a defined benefit (DB) scheme. Which group they fall in will have a huge impact on their future.
“Many DC schemes have protections in place for those close to retirement, but even with these protections they are impacted by the performance of financial markets. With the recent falls in investment markets reducing the value of DC pension funds, unfortunately many individuals in these schemes who are close to retirement may have to defer their plans to retire and carry on working if they are to have enough saved to enjoy a comfortable retirement.
“For anyone lucky enough to have a DB pension, the opposite is true, as the benefits received from most DB pension schemes will not have been impacted by the current crisis. With everything that has happened, and being reminded that we are not invincible and no-one lives forever, we could in fact see an upsurge in retirement requests from DB pension schemes with people taking on a ‘live for today attitude’.
“Whatever stage you find yourself at pension-wise, it is important not to panic and make any rash decisions based on what is happening right now. The country will get back on its feet. The economy will pick up. Things will get better.”