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Since the coronavirus outbreak, stock markets have fallen considerably and are likely to remain volatile for a while. You may therefore be wondering if you should bring forward a decision to do something with your pension.
Please note that the following information relates to pensions held in defined contribution arrangements. If your pension is held in a defined benefit arrangement, then any investment risk is borne by the sponsoring employer. The state pension is unaffected by fluctuations to the stock market.
If you’re currently paying into a workplace pension and have several years before you’re planning to draw on your pension, then you’re probably going to be ok. In time, it’s likely markets will recover, and it might even be a good time to consider increasing your pension contributions if you can.
If you’re close to or considering retirement, many pension schemes will have seen their funds life styled. This means your pension will have been moved into predominantly less risky funds such as Cash, Gilts or Bonds. That doesn’t mean your pension won’t have taken a hit, but it should be considerably less than if you had remained invested in shares. However not all pension schemes offer this automatic life styling so you may want to check what type of funds your pension is invested in.
If your pension is still invested mostly in shares, don’t panic. In time markets are likely to recover although depending on when you are planning to retire, you may have to consider taking a lower income or retiring later.
If you’re under the age of 55 and struggling for cash because of the coronavirus crisis, you may be tempted to cash in your pension.
Be aware that if you release or unlock money from your pension pot, your pension provider will notify HMRC and you will have to pay a 55 percent tax bill on the money you take out on top of fees to the companies offering this service.
These firms are not regulated by the FCA and while doing this is not illegal, it’s not advisable to take money out of your pension pot unless you’re covered under some very specific circumstances.
If you’ve been told to self-isolate and can’t get to the Post Office to collect your pension, The Post Office say you’ll need to nominate a helper to pick it up for you. They’re known as a permanent agent.
Once you’ve nominated a helper, they’ll have full access to your account through their own card and PIN so make sure you choose someone you trust completely.
To get this set up call the Post Office card helpline on 03457 22 33 44, or ask someone to pick up the P6163 form from the Post Office.
You can also use our free, confidential Pension Wise service for information on your retirement options or talk to one of our pension experts at The Pensions Advisory Service about any other pension query.
This article is provided by the Money Advice Service.