What does HSBC, the BBC, delivery company DHL and the RSPCA have in common with each other? Sadly, it is the fact that they have all announced significant staff redundancies in recent days, as a result of financial difficulties caused by the Coronavirus.
From loss of work contracts, to problems collecting license fees and charitable donations, businesses and organisations of all types are feeling the sharp COVID-19 pinch and tightening their belts as a result. Unfortunately, there is likely to be similar bad news to come.
Dame Carolyn Fairbairn, Director-General of the CBI, has said that as the government Job Retention scheme begins to draw to a close later this year, joblessness will rise. In a letter to Prime Minister Boris Johnson, Dame Fairbairn wrote: “Redundancies will rise fast over the autumn as support schemes, especially the Jobs Retention Scheme, wind down. While this will be an issue in itself, redundancies may affect some parts of society more than others. Without immediate intervention, pre-crisis inequalities across regions, gender, and race will worsen. Long term unemployment will leave generational scars”.
When redundancy strikes, there are many emotions and hardships to process. Shock, frustration, a sense of injustice or betrayal, a loss not just of earnings but of routines, relationships with colleagues and a sense of purpose and self-worth. On top of all this, there are immediate and longer-term financial concerns. Whilst the financial priority will be how to pay the mortgage and other bills, it is also important to consider the immediate impact of the redundancy on your pension arrangements.
There are several reasons why you should review your pensions arrangements if you lose your job. The most obvious is perhaps the fact that employer contributions and possibly your own contributions will stop too. Depending on how easy you think it will be to find new employment, the impact of this on your future retirement plans could be catastrophic. If you are over 55, you may even be considering drawing some benefits from your pension to replace lost income. If this is the case, then it may be appropriate to adjust your investment strategy to reduce the impact of any falls in fund values, for at least part of your pension pot. We would recommend advice is taken in this area.
If you do think you will get back to work quickly and wish to continue contributing to your pension, you will need to check how much you are able to pay in, given earnings have ceased. You might also want to consider if your ex-employer’s pension scheme is the most suitable option for you. Did it offer a good range of investment funds? Will it remain easily accessible? Will the charges increase now that you are no longer an active member?
It’s important not to let your pension become one of those “stranded” pension pots, of which there are already millions. The Association of British Insurers (ABI) estimates that more than 1.6 million pension pots worth £19.4bn are “lost” – the equivalent of £13,000 per plan.
Those of us who remain in employment are not only grateful for that but also keen to do what we can to help others who are have been less lucky as a result of the pandemic. If you need further assistance or have any concerns about any other area of your financial planning then please do not hesitate to get in touch.
Equally, if you know family and friends who are going through this, then we would be more than happy to answer any questions. Alternatively they might consider submitting a request to snapshotpensions to review their existing pension plans, the report will provide valuable tips to help assess whether any changes are required.