Pension savers hit by coronavirus crisis issued warning ‘Don’t take the decision lightly’

Pension contributions are something which many will do in advance of their retirement. However, for those needing cash in order to cover living costs, boosting immediate income may be the priority.


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This may be something people are particularly feeling during the coronavirus (COVID-19) crisis, with the outbreak affecting millions financially.

With money being tight, reducing costs could leave pension savers who are contributing into a scheme wondering what they can do.

And, it may be that there are options in terms of their pension, should they decide to temporarily reduce contributions.

Ian Gutteridge, Director at Premier Pensions, has shared some insight on the matter with

“UK plc still has a long term saving problem and we should always try to maintain an adequate level of pension savings,” Mr Gutteridge said.

“However, if personal cash flow is tight, modern day pension plans will usually allow contributions to be reduced or even stopped, without penalty.

“If you save into your employer’s Workplace Pension Scheme, check with your HR Department whether you can reduce contributions.

“You may already be paying the minimum amount and there may be special rules if you reduce contributions further.

“If you save into your own personal pension plan, check with the provider that contributions can be reduced or even stopped without penalty and that you can restart contribution into the existing plan without any additional costs.”

However, Mr Gutteridge’s comments on how a person could make changes to their pension contributions did come with a warning of caution.

He said: “Don’t take the decision lightly though, as the benefits of long-term saving and compounding interest and growth should not be underestimated – and contributions should only be reduced if really needed.”

Meanwhile, some people may working and saving into pensions may be thinking of cashing-in part of their pension savings, and this is something which Mr Gutteridge addressed.


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“Employees who are still saving into a pension scheme, might be tempted to cash in an old pension or part of their current pension arrangement,” he said.

“Under Pension Freedoms introduced in April 2015, there is an encashment option called an Uncrystallised Funds Pension Lump Sum (UFPLS), which allows a pension saver to cash-in their pension in return for a lump sum.

“25 percent of the fund is tax free and the balance is subject to income tax.

“A pension fund of £10,000 would provide a lump sum of £8,500 to a basic rate tax payer.

“However, encashing a pension under UFPLS rules immediately triggers the Money Purchase Annual Allowance (MPAA).

“This restricts all future pension savings (whether these come from an employer or from the individual) to just £4,000 a year.

“If future savings are greater than £4,000 it is likely the pension saver will pay income tax on the excess savings over this amount.

“As a result, savers have to be very careful when cashing-in pensions.”

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