Over the past few months, the world has been on hold with coronavirus having a huge impact in all aspect of financial life. Perhaps naturally, so have your future plans. Undoubtedly, this has brought concerns for those with pensions saved in volatile markets.
But as we start to emerge from the COVID-19 pandemic and adapt to our ‘new normal’, is it time to start thinking again about what our futures look like? Is it possible to start picking up plans again? In this article we explore a few ways you could bring the retirement plans back onto the table in the wake of the crisis.
Understand your pension
Are you clear on what type of pension you own? The impact of the crisis on pensions depends on the type of pension owned. The old school method of final salary or defined-benefit schemes may in one way be a lucky break in this instance, with the investment received unaffected by the market performance. The Pension Protection Fund should also support the investment if the company running it fails, a massive reassurance during this time if exposed to industries like airlines. As well as this, the government is still honouring a triple-lock guarantee on the state pension, which remains unaffected by market volatility.
However, nowadays most pensions are set as defined-contribution pensions, from a personal pension or part of a workplace scheme. These bring more individual risk, and it is likely that holders of these style pensions will have seen a drop over the past three months.
Keep up to date with what features your pension has, and how it could help you during this time.
Unfortunately a large number of redundancies during this time has led to a large drop in what people are able to save, however if you are still in a fortunate position to be able to keep saving after the crisis, then you may wish to do so. A pension is a long-term investment, so despite market fluctuations, you hopefully will see growth over the long term, before you need to access the savings.
Cash it in
If you’re struggling in the immediate aftermath of the crisis, taking cash from your pension might give the investment time to recover from market dips, however once it’s gone the opportunity for the value to go back up is gone so it’s often best to wait out any dips as long as you can do so.
Make it Last
Any money you withdraw from your pension now, will impact your future. Perhaps an obvious statement, but the money you have saved needs to last you for the duration of your retirement. In this time, especially if you have been forced into early retirement, take a good look at the figures, and establish how much you need to save in order to make the money last. In the same way as when you were saving for retirement, perhaps think longer-term and try to ride out market volatility.
Ironically, part of your plan should be being ready for the unplanned. With times changing, you may have to adjust the time you were thinking of retiring. Perhaps you are part of the record number of over 65s who could be forced into early retirement because of COVID-19, or perhaps you’re thinking of deferring your retirement to allow your money more time to benefit from growth in the market. Life is having to become more flexible in these new times, and your money should be ready to work for you as and when you need it.
Have faith and stay calm
Making rash, emotional decisions rarely ends well in the world of investing, so although dips in the market may tempt you to sell or pull out, If you already have a retirement savings program under way, with asset allocation appropriate to your risk profile and long-term goals, you probably want to continue following your plan. If you have benefited from financial advice, your adviser should have spent a significant amount of time ensuring you have a robust plan in place so that your needs are covered. Keeping in contact with them during this time should help you to feel calmer as the times change.
Give it time
It is important to remember that pensions are long term investments, and if you’re young and currently paying into a workplace pension, there is time for your pot to regrow and recover following any setbacks. For some more elderly pension savers close to retirement, some funds have provided the option of being ‘lifestyled’, meaning a pension has been moved to less risky funds like cash or bonds as one approaches retirement and would benefit from a greater percentage of their money being in lower risk assets. Explore if yours provides you with this option
Now may be a good time to assess what contributions you are putting aside for your pension. Even though strategies can depend on market movements, increases in contributions can, over the long term, make a greater impact on your retirement pot, dependent on market movements.
If you need help, ask for it
Life is, now more than ever, full of uncertainty so if you need help, ensure you speak to someone about financial advice and guidance.
No-one can predict the future, and as times continue to change and adapt, it’s important to remain calm and consider all options to ensure your retirement plan is as smooth as possible.
This content is published and provided for informational purposes only. The information contained within constitutes the author’s own opinions. i-stock is a trading style of Tavistock Wealth Limited which is authorised and regulated by the Financial Conduct Authority, FCA No: 568089. Tavistock Wealth do not provide ﬁnancial advice. Registered Office: 1 Bracknell Beeches, Old Bracknell Lane, Bracknell RG12 7BW, Company Number 07805960. Tavistock Wealth Limited is a wholly owned subsidiary of Tavistock Investments Plc. None of the information contained in the document constitutes a recommendation that any particular investment strategy is suitable for any speciﬁc person. Source of data: Lovemoney.com, tfagroup.co.uk, Tavistock Wealth Limited unless otherwise stated.