With so many people affected either personally or financially by the current coronavirus pandemic, the impact on finances and in particular pensions won’t necessarily have been at the top of everyone’s list of concerns. But the impact on the stock market will affect many pension pots.
What is the Government doing to protect the pensions of furloughed staff?
The Government is covering 80 per cent of salaries up to £2,500 a month – equivalent to the UK average wage of £30,000 a year – until the end of September.
Its Job Retention Scheme also replaces a 3 per cent employer contribution into staff pension pots on earnings between £520 and £2,500 a month.
The Government will only pay the auto enrolment minimum employer pension contribution, 3 per cent on the 80 per cent or £2,500 per month if lower, of the employee’s regular monthly wage.
No commission, fees or bonuses are included. If the employer pays more than this, the JRS only covers 3 per cent of the furloughed salary as an employer contribution.
What to do if you have been furloughed
Unless you are told otherwise, your own pension contributions and your employer’s contribution will continue at the current percentage but will be based on the amount you are paid while on furlough rather than your normal salary.
Your pension plan may give you the option to reduce or suspend your contributions, or to opt out of the plan altogether.
Think carefully before taking any of these options as they could have a sizeable impact on the value of your pension savings when you come to retire.
The above applies to defined contribution or ‘pot of money’ pensions, where you build up a fund which is invested for retirement at your own risk. These are now prevalent in the private sector.
Seek professional advice
Pensions are a complex area and with so much impacting on finances it is worthwhile securing expert, unbiased advice from an independent financial advisor.
For pensions and investment advice contact Becky on 07969 269677 or email firstname.lastname@example.org