Don't panic with your pension
For pension savers, one of the biggest worries is global stock markets continuing to crash and taking their life savings with them. But the key message is: don’t panic. Sometimes doing nothing is the best policy.
Even for those about to retire from a defined contribution scheme, and so with no time for their funds to recover from the recent run of market losses, a kneejerk response is unlikely to help.
Instead, people in this situation should be urged to discuss the options with their adviser or scheme administrator.
- Could you delay retiring?
- Could you draw out a small amount of cash rather than committing your whole investment?
- Could you live off other savings for a while?
Employers also need to offer all pension savers clear, easy-to-understand information about what is happening to their schemes.
According to a snapshot survey conducted by REBA, 12.5% of employers are considering cutting back on pension contributions to help balance the books post COVID-19[i].
This percentage may well rise now the Pensions Regulator has given employers the green light to put final salary pension payments on hold “where absolutely necessary”.
Take advantage of government aid
Very few households have the recommended three months of income saved up for a rainy day. In fact, in 2018 a Royal Society of Arts survey found that a third of UK employees had less than £500 in savings[ii].
So, even among those who can keep working from home, having to manage childcare or support a self-employed partner could quickly cause problems. Fortunately, the government has stepped in with various measures to assist those who lose out due to COVID-19.
- Those who fall ill can claim statutory sick pay from day one.
- Employees who are unable to work due to the pandemic can claim up to 80% of their salaries – up to a maximum of £2,500 a month – back via the government’s Coronavirus Job Retention scheme.
- Homeowners (and buy-to-let landlords) who will struggle to keep up with their mortgage payments as a result of COVID-19 can apply for a payment holiday, usually for three months.
- Rental tenants who lose income cannot be evicted for non-payment of rent for the next three months – although any unpaid rent will still have to be paid over time.
Communicating these initiatives to employees is another important part of an employer’s role at this time.
Make the most of your flexible benefits
Flexible, or salary sacrifice, benefit programmes can be used to ease the pressure on employees’ outgoings, and thus avoid draining their savings, thanks to discounts and tie-ins with partners such as insurers and utility providers.
They can also offer employees access to relevant services such as online GP consultations, will writing services, and bereavement support.
With stress and anxiety levels on the up since the pandemic hit, it is also worth promoting any mental health support that is available, as well as offering helpful extras such as discounted membership to virtual gyms.
It’s highly likely that if you have group income protection in place you will already have access to many – or all – of the services mentioned above. And at no extra cost. Now, more than ever, you need to find out what’s available to you and your employees, then communicate it well to raise awareness levels and bolster usage.
The goal is to keep it simple and concentrate on key messages that will resonate with people and help them through these unprecedented times.
*This article was written for, and features in REBA, April 2020.