My Workplace pension and COVID 19

My Workplace pension and COVID 19

The spread of COVID-19 has contributed to a significant fall in share prices and, for many people, a significant reduction in the value of their pension pot.

Though this can be worrying but it needs to be seen in the context of long-term stock market performance.

Pensions are intrinsically a long-term investment. It’s to be expected that the value of individual pension pots will go up and down from time to time, and more so in times like these when not only businesses but entire nations face a period of great uncertainty.

Should I stop paying into a pension in a time of Economic Uncertainty?
Members are able to reduce or stop paying into their plans, we appreciate some may be forced into this position, but we urge all members to think through the implications before they make their decision. There are four areas we would encourage members to look at;

When you pay in your employer pays in

if you stop paying in your personal contribution it is very likely the employer will also stop paying in

Your Pension contribution will receive Tax Relief

Each pension contribution you make will receive tax relief at your marginal rate. This means for a basic rate taxpayer an £8 pension contribution becomes £10 and for a higher rate taxpayer £8 will become £12.

Benefit of pound cost averaging

The best way to invest in a falling market is by dripping money in, because you pick up shares at cheaper prices but without risking a lot of money. If markets fall again, it’s unfortunate, but also means you can just buy more at an even lower price. This will mean losing some money in the short term but at the benefit of buying shares at lower prices in the long term.

Compounding Interest
The wonders of compounding mean those with many years until retirement will take significant advantage by making payments today – our cost of delay calculator helps identify this difference:

What does this mean – for a 35 year old that wishes to retire at 65, by continuing to pay in now you could receive a pension:

  • 34% higher than if you waited 5 years and made the same monthly payments
  • 88% higher than if you waited 10 years and made the same monthly payments

    Assumes a growth rate of 5% if contributions remain constant

    COVID-19 is having a far-reaching effect, which is contributing to turmoil on world stock markets and pushing share prices down. History shows that stock markets do recover. What we don’t know is when, by how much and for how long this downturn will last.

    In the circumstances, it’s understandable to be concerned about your investments but we would recommend that pension savers remain calm, make informed decisions according to their personal circumstances and avoid acting in haste. For some it may even be a good time to invest more into the pension.

    If you have any concerns or would like to discuss your pension, please get in touch with us.

COVID-19 update for Pension Scheme Members

COVID-19 update

We are all aware of the current situation with the accelerated spread of the covid-19 pandemic. We really are in unprecedented times and Governments are mobilising both on the Health and Financial front to support those that fall ill and to stabilise and assist businesses and the World Economies as a whole.

If you have looked online at the current value of your pension then you will notice that it has fallen in value. It will not have fallen as far as the major indices have, the FTSE 100 that we all tend to look at has fallen from a peak of 7,727 to 4,974 as I type this a fall of almost 36%, the Dow Jones has also fallen from 29,568 to 20,776 currently a fall of  around 30%. Your pension is not invested entirely in shares so will not have suffered as much although it will be worth less than it was.

Stock Markets always look ahead, at the moment the uncertainty around the impact of covid-19 on global growth is the market’s major concern, along with the fact that profits from all companies will be lower, than had been anticipated just a few weeks ago, which means that prices are being marked down. The fact is that no one knows when this pandemic will be under control and how much damage it will do the World Economies, we will however get through this and things will in due course recover. You have probably read about the recovery being ‘U shaped’ as opposed to ‘V shaped’. In simple terms it means that the investment managers expect it take longer than they had initially thought.

Obviously, those of you nearer to retirement will have greater concerns about the market falls, however, the pension schemes that we run are set up on a ‘Lifestyling basis’ which means that the risk of the portfolios are gradually reduced during the 15 years prior to the normal retirement date for the scheme which defaults to 65, unless you have specifically opted out of ‘lifestyling’ by choosing your own funds.

The silver lining on the horizon is that your contributions are paid on a monthly basis so you will be buying more units this month than you were last month and in due course as some normality returns to the market you will then benefit. Please remember you receive tax relief at your marginal rate on your own contributions.

If you should have any questions then please feel free to get in touch.

Keep Safe


 Jon Isaacs FPFS

Chartered Financial Planner

Managing Director

3DIFS Employee Benefits & Wealth Management


Budget March 2020 – Changes to Pensions

Following on from last weeks budget the following changes were made to Pension Rules:

Tapered Annual Allowance

  • As a result of the unintended consequences that the Tapered Annual Allowance has had for staffing levels within the NHS, changes were strongly anticipated. From 6 April 2020, the two income thresholds – Adjusted Income and Threshold Income – will both rise by £90,000 to £240,000 and £200,000, respectively. This will affect all those with income above the thresholds, not just those within the NHS.
  • In addition, the lowest level that the Tapered Annual Allowance can drop to will reduce by £6,000 to £4,000 from 6 April 2020. Those with adjusted income of at least £312,000, therefore, will be subject to a taper of £4,000.
  • The Lifetime Allowance will increase in line with Consumer Price Index (CPI) inflation to £1,073,100 from 2020/2021.


  • The increases to the Tapered Annual Allowance thresholds represents the first increase to the amount that high earners can contribute to their pensions in a decade. The change will not affect tapering of the annual allowance in previous tax years, which is relevant for Carry Forward.
  • Another small increase to the Lifetime Allowance after many years of cuts is good news. The increase of £18,100 will reduce the potential tax bill by a further £9,955. Members of Defined Contribution schemes should consider the potential loss of Lifetime Allowance indexation when funds are moved to drawdown and then become subject to the second Lifetime Allowance test.

If you have any queries regarding this please don’t hesitate to get in touch.

Utilising unused pension allowances

Over recent years there have been numerous changes to pensions and in particular to the annual allowance and not for the better!
The benefit of topping up your pension with unused allowances from previous years are often overlooked. Utilising these allowances is often the cornerstone of our recommendations.

What is the annual allowance?

In essence the annual allowance places a cap on the amount you can contribute into your pension each year, on which you can receive tax relief. For the 2019/20 tax year the annual allowance has been set at £40,000 (this is dependent on your level of income). I am deliberately over simplifying matters here since the £40,000 allowance is reduced by £2 for every £1 your total income is over £150,000, reducing ultimately to £10,000.

Annual allowance over the years

Over the past 11 years the government has significantly reduced the annual allowance.

You can see the trend from the chart below.

What counts towards pension annual allowance?

All contributions made by you or your employer utilise part or all of your annual allowance.

Carry forward rules

Carry forward rules allow any unused annual allowances to be carried forward
from previous tax years. The main rules of carry forward are as follows:

  • You must be a member of a registered pension scheme in which your
    unused allowance would be carried forward from. Although you do not
    have to have contributed.
  • You must fully utilise the allowance for the current tax year first, before
    carrying forward previous years.
  • Your contribution cannot exceed your remuneration in the current tax
    year. Different rules can apply for Company Directors.

In summary I believe with the possibility of a Corbyn administration you should make use of all allowances available, they might be attacked. The deadline to carry forward your unused 2016/17 allowance is 5 April 2020.

If you would like to discuss this further, please contact us and we would be more than happy to help.