Pension income is one of the few things people can rely on in retirement. State pensions provide a relatively low amount of income and nowhere near the same amount of flexibility, making private schemes very valuable financial assets.
- Pension: Tax relief rules explained – how earnings will affect bonuses
Because of these factors, it can be incredibly painful to see pensions fall in value, especially when the cause is something out of the holder’s control.
Coronavirus has hit many people’s pension pots and while younger workers may be able to ride out the damage, those approaching retirement are unlikely to have similar options.
Thankfully, there is advice available for people stuck with these problems which can help them plan out their next steps.
Joel Kempson, a Personal Finance Expert at money.co.uk, provided insight on what options people have, even when factoring coronavirus: “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.”
The first topic he covered focused on professional advice, a complicated and often costly option that some may be intimidated by.
Getting the right advice
“Take the time to think about what your financial goals are without letting panic about the present drive your decisions for the future.
“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.”
Within the UK, there are thousands of companies and independent financial advisors offering this type of service, meaning it can be daunting to even know where to start.
Fortunately, Joel highlighted a number of sites and service providers that can help narrow down the options: “Sites like Unbiased.co.uk and VouchedFor can be good starting points to find affordable and independent advice.
“This is especially helpful when thinking about things like the 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.”
Pension warning: Those approaching retirement targeted by scammers [WARNING]
Scottish Widows warn on pension scam which could induce steep tax bill [INSIGHT]
Martin Lewis insight as man fears for pension in coronavirus pandemic [EXPERT]
The UK has very unique pension laws which provide people with large amounts of freedom in how they access their pots.
From the age of 55, British savers can dip into their pension assets but Joel warns that people should think twice before taking action: “If you’re aged over 55 and you’re planning on getting access to your pension soon, you may have to think about taking a lower income than you had originally planned.
“By leaving more in the pot now, it is possible that you’ll be able to benefit from future increases in the value of your investments.”
Some people may also be considering buying an annuity, which can provide income in retirement.
- Pension: UK regulators join forces to provide comprehensive guidance
These annuities can be impacted by interest rate movements and Joel touched on how Bank of England decisions can alter the costs involved: “You may be planning to buy an annuity. Annuities are financial products you can buy with your retirement pot which guarantee you a set income for the rest of your life.
“The cost of getting an annuity is influenced by a number of factors, including the Bank of England base rate. The Bank has recently reduced the rate in order to soften the economic impact of the coronavirus.
“This is likely to affect the cost of an annuity, and you may face additional charges as a result.
“Again, it’s worth getting independent financial advice from a trustworthy source before you buy an annuity.”
Finally, Joel commented on the unfortunate reality facing many people in the UK at the moment.
Coronavirus has forced many people out of work who may then have no choice but to fall back on their savings and pensions to fund them.
This is understandable, but Joel implores people stuck in this problem to consider any other options they may have: “If you are aged 55 or over and you’ve been made redundant due to COVID-19, it could be tempting to start drawing on your pension as soon as possible.
“But think carefully before you do this. If you weren’t planning on withdrawing money from your pension at this point you should think about what other short-term options are available.
“The longer you can reasonably hold off taking your pension the more time there will be for your pension investments to potentially increase in value after any coronavirus-related fall.
“You may be entitled to financial support from the government through at least one of several benefit schemes, including Universal Credit, New Style Jobseeker’s Allowance and New Style Employment and Support Allowance.”
Source: Read Full Article