Hundreds of Firms to Stop Pension Top-ups over COVID-19
It is expected that hundreds of companies will abandon attempts to fill shortfalls in their employee’s pension schemes due to financial pressures during the coronavirus crisis.
It is anticipated from pension experts that shortfall top up contributions will be cut by approximately £500 million. Some large companies have already missed payments whilst others plan to stop making payments temporarily.
The pension schemes affected are the most valuable for staff because they guarantee a retirement income based on your salary while working.
Pensions Regulators are permitting the suspensions to help businesses survive, however have advised there has to be a fund in place to the promise. In the majority of cases these funds have huge shortfalls and the coronavirus crisis has made this situation worse.
Employers should still be making emergency contributions, in addition to their normal ones, to try to close the gap.
Pension consultancy firm, LCP, has estimated that more than 500 companies will take advantage of an emergency measure which provides that the trustees of pension schemes can allow their businesses to put off paying for three months. This will allow companies short term relief on the basis that they will catch up with the contributions at a later date and continue to support the scheme in the long term.
The Pensions Regulator has provided some reassuring advice that it was vital to support businesses through the crisis, and if a company did fail, staff would be supported by the UK’s Pension Protection Fund.
There has however been some warning that if economic damage from the virus is long-term, the security of retirement incomes will be weakened. The Pension Protection Fund does provide a safety net but if a scheme has to be rescued, pensions for many members, especially the younger ones, would be reduced.
What effect is Covid-19 having on my pension?
If you have a defined contributions pension either private or through your employment your savings may have been affected as a consequence of the coronavirus. Pension schemes invest in the stock market so the current rises and more recently falls will impact on how much is in your pension fund. It is however worth noting that your pension may also be invested in lower risk funds, such as bonds, which will usually offer a fixed rate of return, although this may not always be the case
It is important to remember that pension savings are most commonly long-term investments. If you are young it is not likely to be something that you will need to be concerned about as there will be plenty of time for the markets to recover in the future, before you will need to draw on your pension. Alternatively if you are older and/or close to retirement your pension pot may have taken a larger hit.
Further information and advice can be found on the Pensions Regulator Website.
How can Ellis Jones help?
Our specialist Banking and Finance Litigation team has substantial experience in dealing with claims against financial institutions and financial advisors. We have recovered in excess of £60 million for our clients since 2012. We can assist you by advising on a claim or complaint if you believe your pension to have been wrongly administered or if you have been poorly advised.
If you believe you have incurred losses as a result of mismanagement of your pension scheme or a pension related enquiry, and would like to explore the possibility of making a claim, then please feel free to contact us for a no-obligation chat about your case on 01202 057738. Alternatively, please email Kirsty.Handyside@ellisjones.co.uk or William.FoxBregman@ellisjones.co.uk.