Coronavirus – Workplace Pension Employee questions (part two)

March 26, 2020

During this period of uncertainty, there are several questions that have been raised in relation to employees Workplace Pensions and Benefits.  We feel this would be a good opportunity to communicate our current understandings.  

Here is a list of questions that have been asked:

I keep hearing this expression Furlough.  What does it mean? An employee furlough is when bosses require their staff to take unpaid leaves of absence.
In other words, they’ll still technically be employed but won’t work or get paid.
If I’m made ‘Furlough’ how are my pension contributions treated? You’re pension contributions will continue in the normal way, however, they will be adjusted in line with the Furlough limits. 
Can the company request I stop paying into my pension? You company cannot request you stop your pension contributions, however, if you choose to, that is fine.   If you do wish to stop contributing, the company will stop contributing also.
Is my pension safe? Unfortunately, when investing into a pension it’s not quite as simple as being able to guarantee it’s safe.  There is an element of risk with every investment.   For example, even if you are invested in a cash deposit, £1 today will not be of the same value in 10 years’ time. 
When you invest into a workplace pension, you will be typically investing into a collective investment.   This is a pooled investment which invests into a range of assets therefore mitigating some of the risk when comparing to investing directly into one *asset.   
It’s important to recognise that a pension is a long-term investment that is linked to the stock market (also known as equity investment) so there will be short term fluctuations in fund value.  When your fund is growing, individuals are generally quite comfortable with this, but during volatile times it is natural to be concerned if you see your pension fund falling.  Past performance isn’t a guarantee of, or guide to future performance.   Over the long term, equities are expected to outperform cash investment.
*An asset in investment terms include Stocks and Shares, Property, Cash Deposits, Government Loan stock and Fixed interest securities.   
Can I choose where I’m invested? Yes.  This is your personal pension under a group banner.  Employees are automatically invested into a default fund which in most cases is a balanced lifestyle fund.  A lifestyle fund automatically moves your money into safer environments at set times are you get older.   But you can choose funds online which are consistent with your attitude to risk.   There are typically tools online with your pension provider to help you with this, but we recommend you seek independent financial advice should you wish to review your funds.
Should I stop investing into my pension during volatile times? When you invest into a Workplace pension, you are typically investing into a collective fund which consists of units. 
For example:
John’s total monthly contributions to his pension are £100.00 gross per month.
John’s £100 contribution invests into a fund with a current fund price of £1.46 per share
This gives John 68.49 units at a value of £100 (100/1.46)
If the fund price increases to £2.12 per share, John’s investment would have grown to a value of £145.20 (68.49×2.12)
When markets have fallen, it is typically a good time to contribute as you are purchasing units at a lower price.  However, all individual circumstances are different, and affordability must always be the priority.  Past performance isn’t a guarantee of, or guide to future performance and we recommend you seek Independent Financial Advice should you require.

We’re here to help…

We know this is a difficult time. If you need a bit of guidance in regards to your options with your company pension scheme, or you have questions about your benefits, please contact us on 01483 881111 or