The Work and Pensions Committee will on Monday publish a report into the Department for Work and Pensions’ (DWP) response to COVID-19.
The key areas of focus regarding pensions include:
• Urging the Pensions Regulator to consider helping workers who opt-out during the COVID-19 pandemic to re-enrol sooner than the three-year re-enrolment date
• Warning companies who have reduced defined benefit (DB) deficit contributions during the crisis should not pay bonuses or dividends to shareholders except in “exceptional circumstances”
• Highlighting the dangers posed by pension scammers
Tom Selby, senior analyst at AJ Bell, comments:
“The COVID-19 pandemic has placed huge strain on household incomes and it is inevitable some people struggling to make ends meet will have felt it necessary to opt-out of their workplace pension. It is crucial these people are nudged back into saving for retirement as soon as possible.
“Under current rules anyone who opts out will be re-enrolled automatically three years later. However, three years of missed contributions is not immaterial – someone earning £30,000 who had been auto-enrolled at the minimum level and chose to opt-out would have £5,702 less going towards their retirement, including £2,138 in employer contributions and £713 in tax relief.”
DB deficits and pension scams
“Companies are being forced to adapt to this crisis too, and the Pensions Regulator has taken a pragmatic approach to defined benefit deficit contributions to help those facing severe strain during lockdown.
“Any firm accepting such help would struggle to justify paying bonuses or dividends, and the regulator would inevitably come down on them like a tonne of bricks.
“Individuals face a clear and present danger from pension scammers, particularly given the uncertainty and volatility created by COVID-19. These scams can range from early access ‘offers’ to exotic investment offers promising double-digit returns.
“Whatever the method, the result for victims is all-too-often the loss of most or all of their hard-earned retirement savings. It remains critical as lockdown is eased that savers are switched on to the dangers posed by fraudsters.”
