There’s a lot going on in the world at the moment, and it’s having an impact on people’s finances and also their savings and investments. Here are some helpful steers and important information to consider if you’ve been worried about your finances.
Seek support
If you’re struggling financially and want to take some positive action, there are options open to you.
The following free services can all offer useful guidance, so you can make informed decisions on what steps to take next.
MoneyHelper
MoneyHelper is a government-approved online service, where you can get impartial guidance on money and pensions choices, either on the phone, in person or online. Its aim is to join up money and pensions guidance, so it’s easier and quicker to get the help you need. MoneyHelper also offers free debt advice if you need it.Pension Wise
Pension Wise is a government service from MoneyHelper, where all the options about how you can draw from your pension will be explained to you. It’s open to anybody aged 50 or over and offers free and impartial guidance to give you a better understanding of how different options work and the considerations for each.Citizens Advice
Citizens Advice can offer free, independent and confidential support on a whole host of issues, from what benefits you are eligible for, to wider help with the cost of living. There is also a free budget calculator to help you manage your finances.Check with your employer to see if you can reduce contributions temporarily
You might be able to pay less into your workplace pension, so you can discuss this option with your employer. We should stress though that this will reduce the size of your pension pot in the future.
What happens if I stop paying in?
The cost of living crisis has left many people dipping into their savings and finding other ways to cut back. If you’re thinking about stopping paying into your pension, you wouldn’t be alone, but it’s really important you know what this means.
Normally, you have greater opportunity to positively improve your income and outgoings when you are employed, whereas when you are retired and relying on your pension, outgoings and income can be more fixed.
That means stopping your pension contributions now could cause long-term damage and affect your ability to achieve your future financial goals.
So think carefully and seek the right help and guidance before making any big decisions.
You can check your benefit entitlements online using this handy calculator tool.
Can I take money out of my pension pot instead?
If you’re aged 55 or over, then yes, you can draw from your pension. Find out more in your Retirement Guide, which you can access on the Creative Pension Trust Member Portal. Before you do anything, you should also get a Pension Wise appointment from MoneyHelper, which is free of charge.
Just remember that taking money from your pension can affect your tax status and eligibility for benefits, such as income support, income-based jobseeker’s allowance, housing benefit and pension credit depending on what age you are, as these are all based on the money you have in your savings and investments. You can find more information on gov.uk.
For all the while your pension pot remains untouched and you do not take money from it, it will not be counted when it comes to any means-tested benefits (the kind of benefits that are calculated and vary based on how much money you have and income you already receive).
Be wary of pension scams
According to Citizens Advice, pension scams have become far more common in recent years since new rules allowing people to take some or all of their pension pot as a lump sum were introduced.
But with the cost of living crisis prompting more people to review their financial arrangements, criminals may seek to target them with seemingly plausible scams, solely designed to con them out of their hard-earned money.
This calls for extreme vigilance if you’re considering your options and you should be wary of anything that seems too good to be true. Read more about pension scams and how to identify them here.
About recent market volatility
The last few weeks have been a turbulent time in financial markets around the world and here in the UK. There are a variety of reasons for this, and if you’ve seen the value of your pension decrease recently, we understand why you might be concerned.
However, it is worth remembering that investment markets regularly move up and down. It can take a while to recover, but they generally do. And, over the longer term, investments tend to outperform cash savings. A recent example of this is the COVID-19 pandemic – stock markets were significantly impacted in early 2020 when the pandemic began but made a significant recovery even before most people had received their first vaccine.
When it comes to your pension, it’s important to remember you’ve made a long-term investment. Over the course of your working life there will be other major political and economic events taking place that send the markets heading in both directions, but over the long term they serve as a very effective way to save for your future.
If you are concerned, the most important thing is not to make any decisions without understanding what they could mean for you – now and in the long term. Taking money from your pension when markets have dipped means you don’t benefit from the recovery, which compounds your losses.
Although it is very hard to predict when stability may return to markets, you’ll be in a stronger position in the long run if you stick with your investment if you possibly can.
If you do need to draw from your pension, be sure to get all the help and guidance available to you (which we’ve covered above) or consider getting advice from a professional financial adviser.
