Coronavirus Pandemic – Operation of your pension plan...
The Trustees appreciate that it is currently an unsettling time with coronavirus affecting so many people globally. We want to assure you that we are actively monitoring the impact of the current pandemic on the Plan and are working with our service providers to minimise any impact to the service provided to members. We have set out further detail below on how we are managing the Plan during the current situation and some further information on investments.
Currently, the service to members is very much ‘business as usual’.
The Plan’s administrator, Scottish Widows, has a well-established plan in place, to maintain service during difficult times such as the current pandemic. To make sure they are social distancing, many of their staff are working from home and other staff are split between their usual place of work (Cheltenham), and an alternative service centre.
If, in future, their staff absence increases significantly, processes which are time-critical and/or have a high impact on Plan members will be prioritised which may lead to delays in dealing with less urgent requests. It would also be helpful if you could send any queries by email.
We’ll let you know through this website if there is any change in the service that Scottish Widows are able to provide to you.
Investment markets are currently experiencing a period of heightened volatility due to the impact of coronavirus.
You are invested in a ‘Lifecycle’ arrangement, unless you are one of the 5% of members who have specifically selected an alternative. The Trustees currently have no intention to change the Lifecycle arrangement.
It is also important to remember the value of Royal Mail’s contributions (and tax relief) to your pension pot - typically for every £3 that it costs you, £10 goes into your pot.
The Trustees selected the Lifecycle option as the default investment arrangement because it automatically manages some investment risks. In a nutshell:
- As members approach their selected retirement age (age 65, unless they have chosen a different age) their pot is gradually moved into Cash and into Bonds in order to manage the level of risk as members move closer to retirement. These assets are typically safer and less prone to losing (or gaining) significant value in the short term although they too will be affected by markets.
- Younger members (those with more than 20 years until their selected retirement age) are heavily invested in Equities (Shares) – this is because over the longer term, Equities are expected to produce higher returns (although they are typically more ‘volatile’). Although younger members will have seen falls in fund values since the end of 2019, it is important to think about the longer term with your pension saving investments and try not to focus too heavily on short term market movements. The Trustees continue to believe that the Lifecycle arrangement is appropriate for most members.
If you have self-selected the funds you are invested in, or if you are likely to take benefits from the Plan much earlier than your selected retirement age, it is a good idea to regularly review your investment options, to check that the funds you are invested in are still suitable for your circumstances. Remember to think carefully before making changes, and to consider your investment time horizon; for many members pensions are a longer-term investment and no changes are required as a result of a period of market volatility.
In summary, at the present time, it’s business as usual for the Plan, and we will update you should there be any changes to the administration of your pension.
Venetia Trayhurn Chair, Royal Mail Defined Contribution Plan
3 April 2020