Seven major pension bodies have joined forces to guide Britain through the savings crisis after retirement pots took a beating in the market downturn and workers fell victim to a rising number of scams.
Pension savers have made a huge number of inquiries following concerns about the security of their money, prompting the largest bodies to publish a manual to reassure scheme members.
The 25-page document answers the most frequently asked questions and outlines all the protections that are in place to shield savers from financial harm during the pandemic.
The long list of questions and answers includes what happens to pension contributions if a worker has been furloughed, how to contact the Pensions Ombudsman during the pandemic and what protection pensions have if employers go bust.
Despite protective measures being put in place, the average pension pot has significantly dropped in value as the economic fallout of coronavirus ravaged stock markets. These sharp losses have had a significant negative effect on the size of “defined contribution” pension pots which depend on how investments perform.
Nearly three quarters of savers were already concerned about the security of their retirement savings before the pandemic, according to a YouGov survey - a proportion which top pension bodies expect has risen dramatically over the last few months.
The joint guide has been published as a collaboration between the Department for Work and Pensions, the Financial Services Compensation Scheme (FSCS), the Pensions Regulator, the Financial Conduct Authority, the Money and Pensions Service, the Pensions Ombudsman and the Pension Protection Fund (PPF).
The PPF alone recorded an increase of more than 15pc in the number of inquiries it had received since the start of the pandemic, with peaks in February, March and April.
Pension groups and authorities have changed several rules to protect savers during the lockdown. The Pensions Regulator has warned savers of the dangers of transferring their money out of existing schemes after an increasing number were tempted to tap their pot as a source of income during the current straitened times.
In response, it asked pension trustees to send a letter to savers considering making a transfer during the pandemic, urging them to reconsider as it may not be in their best interest.
Scammers have already taken advantage of the economic uncertainty of coronavirus to prey on vulnerable people. , National police reporting agency Action Fraud has seen a fivefold increase in scams linked to the virus in March.
Pensions minister Guy Opperman said: "We’re doing whatever it takes to ensure people are supported through these unprecedented times and this guide is a useful addition to the measures pensions bodies have already taken to assist savers, such as the the Pensions Regulator’s transfer warnings and reporting easements.”
The guide was also created to allay concerns over what happens to savers’ pensions if their company goes bust during the crisis.
More than 10 million people have saved into “final salary” pension schemes, also known as “defined benefit”, which are protected by the PPF and guarantee a set pay-out for life regardless of how the markets perform. These schemes are overseen by employers and can collapse if their sponsoring company goes bust.
The PPF acts as a safety net for pension savers by guaranteeing to pay their pensions should an employer fail. However, if the member is under the pension age or jas retired early then they will receive 90pc of what they were promised. rather than the full amount.
Meanwhile, those invested in "defined contribution" pensions are generally protected by the FSCS if their pension provider fails. The FSCS will compensate 100pc of the pension with no cap as long as the pension is provided by UK-regulated insurers and meets the requirements.