State pension: Will the economic impact of coronavirus affect payments?
State pension is a crucial source of income for many people reaching their later years. The economic toll that coronavirus takes seems to only be getting worse, no doubt worrying many pensioners who have limited resources for income.
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Many private pensions have taken a hit in recent weeks.
Defined contribution pensions will likely have had it the worst.
These types of pension schemes are often invested in the global stock market.
This is considered to be sensible for the long term but the stock market for the UK and much of the world has dropped as coronavirus continues to worry people.
This is likely to get worse as more businesses close and less money is spent or made within the system.
Thankfully, state pension themselves will be relatively shielded from this.
State pensions are not affected by any movements in the stock market.
They are not assets invested and as such, they are relatively secure.
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The only thing that will really affect a state pension’s payments is a national insurance record.
The amount a person receives from their state pension depends on how many years of contributions a person has.
A minimum of 10 will be needed for any income and 35 years will be needed for the full amount.
Currently, the most a person can receive from a state pension is £168.60 per week but this will rise in April.
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While state pensions are protected from what happens in the financial markets, they could still face changes in other areas.
Over the last few weeks the government has made several changes to the universal credit system.
On top of this, Rishi Sunak has provided support for workers and businesses across the UK which amounts to billions.
The state have detailed that they will make changes wherever necessary to help people, so it may yet be the case that state pensions are altered in some way.
The Money Advice Service detail that even if a person’s private pensions have been affected by the stock market movements they should still likely be ok in the long term.
As they detail: “If you’re currently paying into a workplace pension and have several years before your planning to draw on your pension, then you’re probably going to be ok. In time, it’s likely markets will recover, and it might even be a good time to consider increasing your pension contributions if you can.
“If you’re close to or considering retirement, many pension schemes will have seen their funds life styled. This means your pension will have been moved into predominantly less risky funds such as Cash, Gilts or Bonds.
“That doesn’t mean your pension won’t have taken a hit, but it should be considerably less than if you had remained invested in shares.
“If your pension is still invested mostly in shares, don’t panic. In time markets are likely to recover although depending on when you are planning to retire, you may have to consider taking a lower income or retiring later.”
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