Are you worried that Covid-19 will impact your job and your finances? Here are your key financial questions answered. Post by Jason Hollands, Managing Director, Tilney. Please note that this information is accurate as of 30/3/2020.
If I Contract Coronavirus, Am I Entitled To Sick Pay?
Worth checking with your employer as it will depend on your contract and whether they have committed to more generous terms during the current health crisis.
The financial measures announced by the Government will support businesses, which in turn should protect workers. If you do not receive full pay then you should get Statutory Sick Pay, which is set by the Government at £94.25 a week and paid for up to 28 weeks once you have been off work for four days in a row.
Many firms, however, will provide better terms than this, including full pay, for a limited period in their contracts.
What Happens If My Employer Says They Can’t Pay Me?
Although this is a very real concern for many, the Government has several support packages in place. Under the new Coronavirus Job Retention Scheme, announced by the Chancellor, it will pay 80% of salary for staff who are kept on by their employer, covering wages of up to £2,500 a month.
This follows the £350 billions support package to help business, so hopefully this will help alleviate concerns. And there are other emergency measures in place to protect workers and ease the stress of sudden job losses or reduced hours. The best thing to do is to do your research and find out whether you might be eligible to claim statutory sick pay, redundancy payments, or state benefits.
What Will Happen To My Pension And National Insurance Contributions?
Working from home will not affect the pension or national insurance contributions made by your employer on your behalf. Equally, should you fall ill, a lot of employers will offer full pay during the standard two-week period of self-isolation when you may be unable to carry on working.
If you are on statutory sick pay, your earnings will be below the threshold for National Insurance and pension payments, so do speak to your employer to see whether your payments will be temporarily ceased.
What If I Can’t Afford To Pay My Mortgage Or Rent?
The Government and Bank of England has already agreed a plan with mortgage providers that will enable anyone struggling to pay their mortgage due to any financial impact resulting from the coronavirus, to be able to take a “mortgage holiday” and suspend payments for three months.
Specific measures for those unable to pay rent have not formally been announced, but the Government has said it’ll bring forward emergency legislation to protect private renters from eviction.
Will The Current Crisis Affect My ISA Or The Value Of My Pension?
This depends on what you hold in your ISA or pension. Cash values won’t have changed, but following the interest rate cut, you will be getting very little interest on cash ISA’s from here on and less return than inflation.
ISA’s and pensions invested in the stock market will have seen their values fall steeply, but providing you weren’t about to cash these in or use your pension to buy an annuity, we fully expect values to recover over time and the speed of this will in large part depend the investments you hold.
Will My Investments Be Worthless Because Of The Stock Market Turmoil?
Stock markets have experienced sharp declines in recent weeks. Recent indicators report the markets have fallen by around 30% globally – less than they were a few months ago.
These periods of sharp declines – known as ‘bear markets’ – are undoubtedly unnerving but are also more common than you may think. Unless you desperately need to access the cash, the worst thing you can do in a bear market, is panic sell your investments when prices are depressed or start make big changes.
While coronavirus is undoubtedly a major shock to public health and economies, it will prove temporary and pass. Markets will recover, they always do.
If Interest Rates Fall Again, What Does That Mean For My Savings?
Interest rates are falling across the globe as central banks move to support their economies. While ultra-low interest rates (now at 0.1% in the UK) can be a positive for struggling businesses, borrowers and mortgage payers, this is painful for those with significant cash savings.
It is hugely important, now more so than ever, to think about putting some cash aside for a rainy day. Equally, now might be time to dip into yours. However, don’t hold more in cash than you sensibly need as a safety net.
As we saw with the Credit Crisis when interest rates were slashed to next to nothing, this eventually acts as a signal for savers to move more money out of cash and into investments in order to achieve a higher return. Funds investing in UK shares are now typically generating 5% income, way ahead of the returns on cash.
