How has Covid-19 affected workplace pension schemes?

This is good news, as it could be argued that the amounts being saved into workplace pensions are already too low.

Meanwhile, sponsors of both defined contribution (DC) and defined benefit (DB) schemes have used the pandemic as an opportunity to assess whether their investment strategies remained robust during market volatility, the focus being on assessing whether default investment strategies performed as expected. The indications are that well-managed investment strategies have held up reasonably well since March. While there have been falls in asset values, this has not occurred to the extent that may have been expected.

In terms of pensions communication, employers have taken different approaches to communication during the crisis, with some actively pushing targeted messages out to members and others simply putting a note on the member website seeking to reassure those interested enough to log in. Overall, lockdown did see an increase in online pension communications from employers, with some using video benefit statements.

Longer term, there is no doubt that the pandemic’s lasting impact on the labour market could well damage people’s retirement plans. The Bank of England, in its Monetary Policy Report, has forecast a rise in unemployment rate from around 4% to 9%. Should this materialise, combined with regular job switching and career changes, the effect could be to lead to an increasing number of pension pots being inadvertently abandoned.

Research by PensionBee has already highlighted that basic auto-enrolment pensions are the fastest-growing dormant category, with an expected increase of 48%, from 10.2 million dormant pots in 2019 to 15.1 million in 2020.

If you wish to discuss your pension scheme arrangements, or your pension communications and engagement strategies in the light of the pandemic, please do not hesitate to contact us.
 

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