Major pension bodies unite to help Britain through Covid savings crisis

Seven major pension bodies have joined forces to guide Britain through the savings crisis, after pension pots have taken a beating in the market downturn and savers have fallen prey to a rising number of scams. 

Pension savers have made a huge number of inquiries following concerns about the security of their retirement pot, 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 pension savers from financial harm during the pandemic. 

The long list of questions and answers includes what happens to pension contributions if you have 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 has ravaged stock markets and the sharp losses will have had a significant negative effect on the size of “defined contribution” pension pots.

Nearly three quarters of savers were already concerned about the security of their retirement savings before the pandemic, according to a YouGov survey, and that is likely to have risen dramatically in recent months, according to the top pension bodies. 

The joint guide has been published as a collaboration between the Department for Work and Pensions, the Financial Services Compensation Scheme, the Pensions Regulator, the Financial Conduct Authority, the Money and Pensions Service, the Pensions Ombudsman and the Pension Protection Fund.

Pension groups and authorities have changed several rules to protect savers during the lockdown. The Pensions Regulator has warned of an increase in advisers attempting to coax savers into a transfer.

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. Action Fraud, the national police reporting agency, has seen a fivefold increase in scams linked to the virus in March.

Guy Opperman, the pensions minister, said it was vital to keep people informed. “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 Pension Protection Fund.

The PPF acts as a safety net for pension savers by guaranteeing to pay their pensions if their employer fails. However, if the member is under the pension age or retired early then they will receive 90pc of what they were promised.