How will coronavirus affect my pension?

I am in the Local Government Pension Scheme (LGPS) will my benefits be reduced, or my contributions increased as a result of the stock market falls?

No – the LGPS is a Statutory Defined Benefit (DB) Scheme so the current decline of asset values in the LGPS funds will not alter the benefits you have earned in the scheme or change your contribution rate.

This is the same for all three LGPS’s in the UK –  LGPS England and Wales, LGPS Scotland and LGPS Northern Ireland.

What about in the future?

Changes to contribution rates and the benefits you earn in the future can only occur after consultation if the cost of scheme benefits increases following a scheme valuation. Scheme valuations occur every three years.

Where can I keep up to date with the LGPS?

Websites will be updated regularly.

Will the administration of the LGPS be affected?

This will be monitored. Local LGPS funds will be under pressure and employers will need to provide accurate information to the funds. Delays to requests for information are likely to increase as they concentrate on work to ensure pensions are paid.

I am in the NHS Pension Scheme will my benefits be reduced, or my contributions increased as a result of the stock market falls?

No, the NHS Pension Scheme is an unfunded scheme meaning that it has no assets as such with benefits backed by the Treasury. So in short nothing should change.

If I am in a Defined Benefit (DB) scheme in the private sector what can change?

If you are a member of a scheme that is still open and you are contributing to get benefits, this should remain the same. Unless the employer attempts to change the benefit structure or close the scheme to all accrual. This will not affect the pension you have earned to the date of any change. If your employer attempts to close the scheme to future benefits they need to consult with affected members for at least two months before introducing changes. This is a legal requirement.

If you are a member of a scheme that has closed to new joiners, but you are still contributing to get extra benefits this should remain the same subject to any changes proposed by your employer.

If you are a member of a scheme that has closed for all members then the benefits you will receive should remain the same.

Will the fall in asset values put pressure on DB schemes in the private sector to close?

It’s a testing time for schemes with imminent valuation dates and for employers where the fall in asset values in their schemes may be reflected in their next annual accounts. But the Pensions Regulator has introduced a range of measures that can potentially help schemes with upcoming actuarial valuations to cope. DB pension schemes are long-term commitments so even significant short-term fluctuations in asset values should not put pressure on schemes to close.

What happens if my employer sponsoring the DB scheme goes bust?

In a scenario where there are insufficient assets to cover benefits in full then it’s possible your scheme could be taken on by the Pension Protection Fund which guarantees 100% of pensions (subject to a compensation cap) for members over their Normal Penson Age and 90% for members yet to reach their Normal Penson Age. Please see the Pension Protection Fund website for more information.

My employer currently sponsors a Defined Contribution (DC) scheme. Can they reduce the contribution rate that they pay?

Potentially your employer can reduce the contribution rate they pay subject to any contractual protections you have relating to payment of pension contributions.

UNISON strongly opposes any attempt by your employer to reduce their pension contributions to your DC pension scheme and there is a statutory responsibility to consult for at least two months on any such proposal.

Will my employer still make National Insurance and minimum automatic enrolment pension contributions if I’m furloughed?

Employers remain liable for associated Employer National Insurance contributions and minimum automatic enrolment Employer pension contributions on behalf of furloughed employees and can claim for these costs from the Government in addition to the wage.

How will Coronavirus affect the value of my benefits in a DC arrangement

Since the coronavirus outbreak, stock markets have fallen considerably and are unlikely to return to their pre-crisis levels anytime soon.

It’s important not to panic however as your pension fund is a long-term investment and even if you are very close to retiring you may find that any losses have been cushioned to a degree by lifestyling. Explained further below.

I’m in a DC scheme and close to retirement. What should I check?

If you’re close to or considering retirement, your funds may have been lifestyled. This means your pension will have been moved into predominantly less risky funds such as cash, gilts or bonds in the years leading up to your retirement date.

That doesn’t mean your pension won’t have taken a hit, but it should be considerably less than if you had remained invested wholly in shares.

However not all DC workplace arrangements offer this automatic lifestyling so you may want to check what type of funds your pension is invested in.

Will the current loss permanently affect my future pension?

If your pension is still invested mostly in shares, don’t panic. In time, markets are likely to recover.  It would be very sensible however to review your pension arrangements and potentially review your plans accordingly.

There is special concern for those who need to take money from their pension pot prematurely before markets can recover (you can access your DC pot from age 55). There could be a significant hit to the value of the pot if not already lifestyled. UNISON is asking whether this group can have some form of compensation.

Should I take my money out of either a DB scheme or a DC arrangement?

Do not make any hasty decisions to cash in your pension pots and be careful of anybody telling you to move your money from you pension arrangement either DC or DB. In times of uncertainty you must be extra vigilant not to be panicked into being scammed by criminals.