7 Steps to stop coronavirus from destroying your pension

Harvey Jones

Saving enough to enjoy a comfortable retirement is never easy, but the coronavirus pandemic has made it even harder

Although stock markets recovered strongly after crashing in March, new research from fund manager Fidelity shows millions have still fallen into a “pension blackhole" as a result. 

Half say their pension savings will no longer generate enough income to retire, so how do you get your plans back on track? 

 

1. Don't panic

A stock market crash hurts but the damage is usually temporary. History shows share prices recover, often quickly, as we saw in April and May. So do not sell up, as you will miss that rebound. If you have cash to spare, invest more in your pension or tax-free Stocks and Shares ISA while share prices are lower. By the time you retire, stock markets could be much higher, and you will reap the benefit. 

 

2. Check you are on track

Now is a good time to round up all your workplace and personal pensions, your ISAs and other investments, and even get a State pension forecast. This will show how far your retirement plans have progressed, and how much further you have to go. 

 

3. Carry on investing 

If your job is unaffected by the pandemic and recession, then carry on investing in your pensions and ISAs as usual, or even increase your monthly payments. 

Make sure you also have a pot of emergency cash in an easy access savings account, to cover three to six months of spending, in case you fall ill or your lose your job. 

 

4. Use Government support 

The Government’s furlough scheme protects employee pensions as well as wages. It pays 80% of your salary up to £2,500 a month, so your pension contributions will fall, especially if you earn more than that. Consider making up the shortfall, once you are back at work full-time.  

Things are tougher for the self-employed, especially if they fall through the gaps in the self-employment income support scheme (SEISS). Even a year or two failing to save for a pension sets you back, so again, make up for lost time once your income starts rolling in again. 

 

5. Carry on working 

If retirement is looming and your pension is threadbare, you may have to join the growing gang of Britons who are working into her late 60s and even 70s. 

More than a million do that already, and their numbers are rising. While many do it to make ends meet, others enjoy remaining active and social. 

If tired you're of your current job, find another part-time role or work on a freelance or consultancy basis. 

 

6. Defer your state pension 

If you are working, you could defer taking your State pension, so you get more when you draw it later. 

If you delay taking the new State pension for a year, you get an extra £10.16 a week when you do draw it,worth £528.32 a year. 

The downside is that you are turning down a year’s worth of income, which totals £9,110.40 in the 2020/21 tax year, and it will take around 17 years to make this up. After that, you will be ahead. 

So only consider this option if you are in good health with a higher than average life expectancy. 

 

7. Stick at it 

Saving for retirement is a long-term job. Most of us save over 30 or 40 years. If you cannot afford to invest today, make it a priority for tomorrow. 

Read more: What to expect from the property market post lockdown

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