What to do if you are worried about the effect of Coronavirus on your pension.

The coronavirus outbreak has been piling pressure on global financial markets and stock markets have been very volatile for the last few months.

Latest figures also suggest more financial bad news is coming as economies around the world contract, with a widespread global recession expected this year.

But how will all of this affect your pensions and investments and what should you do?

Recovery from short-term shocks

Pensions are long term investments, and whilst they can be influenced by short-term shocks, any decision you make can have major consequences for your financial status upon retirement.

It’s important to get professional advice on the different ways financial markets might affect your retirement plans before taking any action.

However, the first thing you should ascertain is whether you have a defined contribution or defined benefit pension plan. 

What type of plan do you have?

If you have a defined benefit plan your employer assumes any investment risk so you don’t need to take any action. The State Pension is also unaffected by fluctuations to financial markets.

If you have a defined contribution plan, whether you got this through work or have arranged it privately, it’s possible that your savings have been impacted by Coronavirus.

Pension schemes invest in the stock market, so large drops and gains affect how much is in your pension pot.

However recent data (June 2020) suggests that defined contribution pensions are starting to show signs of recovery, so if you are young you probably shouldn’t be too worried as you have more time for markets to stabilize before drawing your pension.

Minimising risk for over 55s

If you are over 55 and thinking about retiring, you might be more concerned by the potential hit to your finances.

However, your pension should be invested across a spectrum of risk, with a portion of it invested in ‘safer’ products such as bonds, which generally offer a fixed rate of return.

Depending on when you are planning to retire, it’s important to bear in ming that accessing your money now would mean your pension pot wouldn’t benefit from any recovery in value.

What if you are struggling financially now?

You may also be affected by reduced income at the moment and wondering whether you can access any of your pension now.

You can usually take up to 25 per cent of your pension pot tax free, but this also has implications in terms of any benefits you might have been eligible for. It’s important to check you if you need more information about the financial support available in your current circumstances.

The most important thing is not to panic and rush into any decisions. We are here to help, so if you would like to talk through anything you are feeling worried about and your options, don’t hesitate to get in touch.