In my last blog, I said the world had changed with a move away from defined benefit (DB) pensions.
Now, the coronavirus pandemic has changed the world again and far more drastically. I fear it’s a world where savers could easily make decisions about their pensions that they long regret.
The uncertainty this insidious virus has brought, together with the unprecedented restrictions to slow its spread, presents new challenges we’re all adapting to.
What’s not new, is our resolute support for savers and the people who run pension schemes. In fact, COVID-19 makes this even more important.
Market volatility and uncertainty over employment may prompt people to look again at their short and long-term household finances.
Many will be worried about paying their immediate bills, with plans for retirement taken over by events. Some may be retired, reliant on their pension payments and worried they’ll stop. Others may be looking for opportunities to shore up finances by moving their pension cash elsewhere. They might consider dipping into their retirement savings early to make ends meet.
These fears are understandable, but they should not lead to panicked, knee-jerk decisions. We’d urge savers to stop and think. Don’t, for example, transfer your pension into another arrangement now and regret the decision later.
The Money and Pensions Service have provided helpful information for those with different money challenges and they can provide impartial and free help to those thinking of making a major decision on pensions.
Since the COVID-19 outbreak, The Pensions Regulator (TPR) has released guidance for those we regulate aimed at protecting and reassuring savers. In other words, our focus is on savers, not solely regulation, administration and enforcement. We will be updating this guidance regularly.
We want those paying into a workplace pension, and who have a long time to retirement, to understand that, historically, financial markets have recovered from shocks. The current volatility might have no impact on their ultimate retirement benefit.
DC savers close to or considering retirement may have already seen their pension moved into investments less vulnerable to market volatility. Savers should check this with their scheme provider to be sure.
There may be concern about an employers’ ability to continue supporting a DB scheme, motivating savers to look to other options. Be sure that TPR is doing what it can to support trustees in managing these risks and protect benefits.
And in line with protecting savers, we are calling on scheme trustees to ensure they follow the right process if asked to make a transfer, ensuring people take the right advice from an FCA-regulated adviser.
People who have already retired and are worried about their pension payments should know we’ve told trustees they should focus their activities on key risks to savers and we have emphasised that benefits need to be paid as normal and it’s important that they take priority over other matters.
Our position remains that savers with DB pensions should understand it’s unlikely transferring into a different type of arrangement will be in their best long-term interests.
A major concern is the possibility of scammers taking advantage of peoples’ worries to persuade them into transferring funds into bogus investments.
Research suggest one in four people take less than 24 hours to make a decision on their pension, money that can take a lifetime to build.
We’ve renewed our focus on ensuring savers can spot a scam by encouraging them to visit the Financial Conduct Authority’s ScamSmart COVID-19 guidance and check its warning list before making hasty decisions.
We’ve seen that times of stress are when scammers come out to prey on their victims. Fears about COVID-19 and rapidly moving markets are likely to present them with the confidence they can ravage savers’ pensions. They might do this through the offer of pension reviews, or the carrot of superior returns. It’s important savers know the potential dangers of an unsolicited or unregulated transfer and investment advice and are not persuaded to follow it.
There may be restrictions on people’s movement but there is still advice available for savers. The Pensions Advisory Service offers guidance through its website and helpline. Those over 55 with a defined contribution pension may benefit from a Pension Wise telephone appointment where they can discuss options with specialists.
We might be physically separated from each other, but we don’t have to be isolated. The right advice is still available. We must make sure that message isn’t lost in the panic.
By David Fairs, Executive Director of Regulatory Policy, Analysis and Advice