Following the spread of the Coronavirus (SARS-CoV-2) and the recent volatility in financial markets, as a member of the Defined Contribution (DC) section of the pension scheme you may have questions about what it means for your future benefits.
Firstly, the Trustee want to reassure you that contributions for active members continue to be paid by AXA and invested in line with your current instructions.
It's a well-known fact that stock markets do not like uncertainty and at present the scale and pace of the Coronavirus has played right into that space.
As the virus has spread, stock markets have fallen significantly over recent weeks, but this is on the back of really strong performance throughout 2019. Yes, there is uncertainty about where things will go from here – as we say, markets don't like uncertainty - and this could continue for some time. However, it’s important to remember that pensions saving is for the long-term and that most members invest their pensions savings in Lifecycle strategies which are designed to gradually lower the amount of investment risk as members approach retirement.
We think that it’s worth bearing in mind these points, depending on which part of your savings journey you are in;
- If your retirement is not imminent then you still have time for markets to recover, if indeed they have fallen. In general, there may be plenty more bumps along the way, but it’s good to know that whenever there is a market dip then the positive side is that you can potentially gain in the future because your regular contributions will be invested into markets cheaply.
- If you are approaching retirement in the next few years and you are invested in a Lifecycle strategy (like the majority of members) then your savings will be in lower risk assets compared to those members in their early years of saving. This is designed to insulate savings from market movements and it is expected that volatility of asset value will be more muted.
- If your retirement is imminent (e.g. in the coming weeks or months) it is important to remember that any loss from a fall in the value of your investments is only incurred if benefits are crystallised. This means that decisions on switching, transferring and retiring should be taken carefully in times of significant market volatility like this.
- The Trustee of the Scheme, along with its advisors will continue to monitor developments.
Neither the Trustee, the sponsoring employer or the Scheme’s advisers can provide you with any financial advice in this regard. We recommend seeking independent financial advice before making decisions with regards to your pension with the Scheme.