- 7th October 2020
- Posted by: thisworksadmin
- Category: Lastest News
The Coronavirus outbreak has been a worrying time for us all. Understandably there has been fears about our health and our loved ones. If you are approaching retirement or already in retirement, coronavirus may be causing you to worry about your finances too.
With the interest rates at the records lowest and with the stock markets hit hard, it has been a worrying time for us all. The purpose of this guide is to explain how your retirement plans have been affected by the outbreak and how we can help.
Establish your financial picture
It’s not possible to make a good decision about your future, without having an accurate picture of where you stand in the present.
The fall in share prices and volatility markets over the past few months will certainly have meant a fall in the value of your portfolio. This will be calculated depending upon the value you hold in the stock market, how its positioned and the level of risk you have been exposed to.
You will need to collate up to date information on what your current portfolio is worth, what you have in savings and how your pension pot has been affected. Also, your normal income and expenditure may differ due to the outbreak. Keep this in mind. This will give you a full financial picture.
We would recommend for you to ask your financial advisor for a up to date statement. Or alternatively if you don’t have a financial advisor, we would advise you to call them directly to receive this information.
What do the figures mean?
Do not rush into any decisions about changes to your plans, without viewing your figures you receive in context. And getting some professional help from someone that can help you with what the figures mean and how they will affect your goal.
Some facts sometimes can miss out some details. And can be worrying when seen in isolation. For example, the FTSE 100 lost 24% of its value between January 1st and April 22nd this year, but that doesn’t mean that will be the corresponding fall in the value
of your investments.
Most investments and pensions are likely to be made up of a mixture of funds. Some will probably be invested in shares, but there are likely to be less risky assets too such as bonds and cash which won’t be as affected by market volatility.
It’s vital you speak to your fund manager, pension provider, scheme administrator or an independent financial adviser, and ask for guidance when assessing your position.
Think long term – What do you wish to achieve?
“Always remember a pension is a long-term investment”
We don’t know what effect the Coronavirus is going to have on the economy, or how long the coronavirus pandemic will last, but taking a long-term view allows you to see that even major stock market crashes are recoverable. In fact, let’s imagine you had put all your savings into the FTSE 100 in 2007, at the very worst time just before the great financial crash. If you had stayed invested, you would have now almost doubled your investment just over a decade later despite the stock market falling by 31% over the course of 2008*. And ten years after the Black Monday crash of October 1987, the FTSE 100% was 189% higher. So, if you are looking to start drawing your pension in ten years’ time, you may have very little to worry about.
But what if you don’t have the luxury of time? What if you were planning to retire in the next five years, for example?
*information correct on 23rd April 2020
Accessing your pension sooner rather than later.
If you find your retirement plans are going to be affected by the market crash, there is one option. This is to push back the date you start drawing down your pension. However, you may not want to work for longer than you planned or feel its not possible.
The other option is you could avoid taking out any more than you absolutely need while fund values remain depressed. The reason for this is that the more you can leave invested, the more you will benefit from a stock market recovery.
If you are at the age, where you can start drawing your state pension, this could provide some income without selling your investments, before they have chance to recover some losses.
When you are close to retirement, many of your shares will be moved into safer assets, such as cash, government bonds or gilts. This means your pension funds have been ‘life styled’. This doesn’t mean This doesn’t mean you will be immune from losses, but they are likely to be far smaller than those who are further from retirement.
Deciding to retire is one of the most significant financial decisions you will ever make and an area where professional advice can help you make the right decisions at this crucial time.
Speak to your “Pension Consultant”
The coronavirus pandemic has made the financial times hard; these are the times where the financial advisors are here for you!
Even a small, quick conversation that might just reassure you that, in fact, you don’t need to be doing anything differently right now.
We understand that this is a worrying time if you’re retired or planning to retire soon and hope this blog has been useful. If you are worried about your finances or would like to understand the benefits of professional advice, we are happy to help.