My hours have been reduced/I am on unpaid leave, can I take some income from my pension to support me?
Yes you can, as long as you are over the age of 55 (or, in some exceptional cases, if you are below 55 but in very poor health).
Before making this decision we recommend speaking to a financial adviser as there are some important things to consider, for example:
How will this affect your future retirement income?
Will you pay more tax if you take money now?
Will it limit the amount of money you can save into pensions in the future?
You’re not on your own with this decision. We can talk you through all the facts and help you reach a decision. Alternatively Pension Wise offers free and impartial guidance on accessing pensions.
Can I cash my entire pension in?
Yes you can, as long as you are over the age of 55.
Taking your whole fund in one go could result in you paying more tax than if you took your pension fund gradually throughout retirement. You should also consider carefully how you will manage in retirement without this pension. You are also likely to have future pension contributions restricted if you take your pension now, meaning it will be harder to build your pension fund back up again in the future.
I’m already taking money from my pension. Can I increase the amount I get?
Yes, you can change the amount you take as often as you like. We suggest speaking to an adviser before making any changes as there may be some implications that you’ve not considered. Again, you might find Pensions Wise a useful source of information in the first instance.
What happens to my pension contributions if my hours have been reduced and consequently my salary has fallen?
Your contributions will normally have been set as a percentage of your pay so, if your pay reduces, so too will your contributions and those of your employer. You can choose to increase your percentage if you want to keep your contributions at the previous level.
Speak to your employer if you wish to change your contribution rates.
What if I’m on unpaid leave?
If your income has stopped it is likely that your pension contributions will also have stopped. If you start working again for the same company, you should be able to restart your pension contributions.
What if my employer is using the new government Job Retention Scheme?
Your employer is obliged to contribute a minimum amount into your pension still and this is in addition to the 80% of wages (up to £2,500) it will pay to you. The employer pension contribution available through the Job Retention Scheme is equivalent to 3% of your qualifying earnings. This may be different to the salary definition your employer previously used. Qualifying earnings are your total earnings (including things like bonuses, commission and overtime). The first £6,240 each year is ignored, as is anything above £50,000. This contribution will be funded by the government and does not affect the 80% that is payable to you. This may well be less than you were receiving before.
Your employer will tell you what, if anything, you need to contribute personally.
What happens if I can’t afford to pay as much into the pension?
If you are receiving less income now you might want to reduce or stop your contributions to the pension until things return to normal. The Courtiers pension allows you to vary your contributions as much as you like and you can stop paying in altogether if you wish.
However, if you are thinking about decreasing your contributions you need to consider the long-term impact this will have on your retirement savings.
In addition, most employers require you to make at least a minimum level of contributions in order to qualify for the company’s contribution. Reducing your contribution, or stopping it altogether, might mean that you miss out on these valuable employer contributions.
You should check with your employer what contributions it expects you to make to qualify for the employer contributions.
If you stop contributing altogether, you can usually restart contributions again in the future, but your employer might restrict the points in the year when this can be done. For example it might only allow you to join on the scheme’s anniversary. You should check with your employer whether there are any restrictions on re-joining the scheme.
What happens if I pay my contributions by salary exchange (also known as salary sacrifice)?
If your employer has chosen to use the new Job Retention Scheme, you will need to speak to your employer to see what effect this will have on your contributions but it is likely that you will stop using salary exchange. If contributions are to continue, they will likely move onto the ‘relief at source’ method, meaning that if you are a higher or additional rate tax payer, you will need to reclaim some additional tax relief on your own contributions, usually via your tax return.
If you are not working, it is likely that your contributions will have stopped too.
Where can I see the value of my pension?
You can check the value of your plan via our online portal, or if you wish to register for the first time, you can do so via the following link:
If you haven’t logged in before you will need to activate your account. Please contact us if you need any help.
I am worried that my pension will keep falling in value and I want to protect it. What can I do?
You can move your money away from the more risky investments such as equities (shares in companies) and into safer investments like bonds and cash. However, these investments do have some risks too.
Firstly, it is important to remember that a pension is often a life-long investment and making decisions based on short-term conditions can have a huge impact on your retirement fund and the income you receive in retirement. Investments go up and down but generally they rise in the longer term (although this is not guaranteed).
Moving your money to lower-risk areas now could mean that you have suffered the pain of recent losses but you are also removing the opportunity for future gains, if and when global stock markets start to recover. Of course no one can predict when this might happen and there is a chance investments will fall further.
It used to be the case that most people bought an annuity at retirement – that is to say they exchanged their whole pension fund for a guaranteed income for life (usually paid by an insurance company). Retiring via this method meant it was vital what your pension fund was worth on the day you bought your annuity. If your fund had dropped significantly just before retirement, your annuity income would forever be lower.
Nowadays, more people choose to leave their pensions invested as they enter retirement, and draw out what they need each year. In this scenario, even if your pension fund drops just before retirement, you will only be drawing a small amount out in the early years, so the rest of your fund will remain invested and will hopefully have the chance to grow again as and when stock markets recover.
If you are within 12 years of your selected retirement age within the Courtiers pension, we will automatically have been reducing the level of investment risk within your pension, via a process known as lifestyling. Lifestyling is designed to protect your pension as you get closer to retirement. Lifestying usually applies by default, particularly if you joined the pension automatically, so you should have benefited from this unless you made a conscious decision to exclude it as a feature of your plan.
If you are still interested in reducing your investment risk now, please contact your Courtiers adviser. This is a personal decision and one that you need to feel comfortable taking. We can help talk you through the implications.
What happens if I want to pay more into the pension?
If you are thinking about increasing your pension contributions you need to consider carefully the affordability of this given the current global uncertainty. For example, what would happen if you were to be out of work for a period of time? If you have put money into a pension and are under 55 you won’t be able to access it again immediately.
If you do want to increase your contributions, speak to your employer to make the necessary changes to payroll.
Questions to ask yourself before accessing your pension:
You may have seen a drop in the value of your investments as a result of COVID-19 and you may be tempted to cash in your pension. Doing so could result in your investments being sold at a loss. It might be better to leave the money where it is in the hope that things recover before you need the money.
If you need money immediately you may want to look at drawing from your other savings, if you have them, perhaps in cash accounts where the value won’t have dropped as a result of COVID-19.
The government has announced a range of measures to support people during the pandemic. You may be entitled to government help, which could be better than accessing your pension now.
If you don’t have any other options than to access your pension, you should consider only taking what you absolutely need, rather than cashing in the whole fund.
If you hold investments in tax-efficient places, such as pensions and ISAs, you can reduce your investment risk without drawing the money out. Most providers have a range of different investment options catering for all levels of investment risk.
If you make regular contributions, you may want to continue doing so as you will be able to invest at lower prices than before the market downturn.
Decisions relating to accessing your pension are important. Think whether you’d benefit from taking financial advice. If you don’t think you need advice, there are a number of useful websites we’d encourage you to visit before taking any action. A good starting point is the Financial Conduct Authority’s special COVID-19 page.
Additional support from the government for COVID-19
If you are self-isolating because of COVID-19 you can claim Statutory Sick Pay. This includes if you are caring for someone who is self-isolating.
Financial support maybe available from your Local Authority in England. £500 million has been provided by the government as a hardship fund. Most of the support will take the form of providing Council Tax relief.
The government has agreed with mortgage lenders that they will offer repayment holidays of three months to households in financial difficulty. This will also apply to landlords whose tenants are experiencing financial difficulties.
If you are experiencing difficulty paying back loans or credit card bills, the government advice is that you should talk to your lender. The Financial Conduct Authority has called on lenders to use the flexibility built into their rules to support consumers.