Pandemic pension problems
Potential pension problems brought on by the coronavirus pandemic are the theme this week with new research by Canada Life revealing that one in ten workers have paused pension contributions since the start of lockdown, which could have serious implications for retirement plans.
Of those who have cancelled contributions the biggest reason given (37 per cent) was to use the money for essential spending, while thirty per cent paused because of redundancy or furlough.
"While a three-year pension holiday may seem like a minor break in the context of a career spanning decades, our analysis shows that the long-term impact of that decision could be significant," says Andrew Tully, technical director at Canada Life. "Any choices made now could have real significance to the quality of life in retirement so it is vital that the impact of this is understood properly, from the outset."
A new study by the People's Pension meanwhile, says that pension fraud has increased during the pandemic and that 'urgent and decisive action' is needed to stop scammers stealing people’s life savings.
The People’s Pension and The Police Foundation are calling on the UK government to give pension companies the power to trigger an urgent regulatory response to savers at risk of fraud, enable regulators to override the statutory right to transfer should a suspected scam be reported to them, and ensure victims of pension fraud are not hit with tax penalties as is currently the case.
“Currently, pension providers can flag a potential scam to a customer, but we can only stand by and watch if the individual chooses to proceed with a risky transfer that could result in them losing all their savings," says Phil Brown, director of policy at The People’s Pension.
At the other end of the savings spectrum, nearly two-thirds (62 per cent) of 16-17 year-olds are unaware that they are set to receive a lump sum from their Child Trust Funds (CTF) or Junior ISAs, according to a survey by Orbis Investments. The first CTF recipients are due to turn 18 this month but nearly half are unsure what to with their savings with 10 per cent considering splashing the cash rather than reinvesting.
"Now that those turning 18 are gaining access to their money it is important that they consider all their options including investing, or keeping their pot invested, in order to make the most of the contributions made on their behalf," says Dan Brocklebank, UK Director, Orbis.
Sticking with family matters, anyone considering setting up a trust to pass assets to their children and grandchildren should do so now while asset values are low, according to private wealth law firm, Wilsons.
Trusts are popular amongst those who wish to pass on assets to family members who may be too young to receive large sums of money, or others who may not be capable of managing their own affairs.
“A knock-on effect of coronavirus is economic uncertainty and as a consequence asset values have fallen," says Rupert Wilkinson, Partner at Wilsons. "Now could be a good time for people who have been considering settling assets on trust to act."