The pandemic has affected almost everyone in numerous different ways, whether that is financially, medically, or socially; its death toll has been appalling and overshadows everything. Fortunately, the vast majority have come through the pandemic, but the speed of recovery has been variable.
Medically, many patients have recovered well, but some have prolonged symptoms which have been diagnosed as ‘long COVID’. A corresponding picture emerges with people’s finances, as many people have lost earnings or even their jobs, but economic recovery could help restore their financial health. A minority, however, may suffer the financial equivalent of long COVID.
Insurer and pension provider Legal & General (L&G) has monitored the financial effects of COVID-19 throughout the pandemic, particularly the long-term impact on the prospective pension income of workers over 50 who are closest to retirement. In the early months of the crisis, the picture wasn’t too disturbing; last August, only 2% of this group envisaged cutting their pension contributions.
What are the numbers?
Fast-forward eight months to April this year and the L&G research revealed that some 12% of workers over 50 were paying less into their pension pots because COVID-19 had disrupted their finances. This led L&G’s number-crunchers to work out just how severe the impact could be on the retirements of those one-in-eight (about 1.7 million) 50-plus workforce members.
The message from L&G’s figures is simple, ‘A 50-year-old opting out of a workplace pension could be £50,000 worse off by the State Pension age of 67 if they never opted back in and continued working full time throughout.’ So, if you have cut back on your pension contributions during the pandemic, you should consider restarting them as soon as you can.
The value of investments and income from them may go down. You may not get back the original amount invested. A pension is a long-term investment. The fund value may fluctuate and can go down. Your eventual income may depend on the size of the fund at retirement, future interest rates and tax legislation.