Keep Your Retirement Plans on Track

The COVID-19 pandemic is having a widespread impact on all aspects of our finances, including retirement planning. However, while recent stock market volatility undoubtedly poses a challenge, particularly for those close to retirement, it is important not to allow the outbreak to derail your plans.

A resilient retirement plan

One thing the pandemic has vividly highlighted is the importance of developing a resilient retirement plan. Although market turbulence will impact all pension holders, those with a clearly defined, carefully considered plan will inevitably be in much better shape to weather market volatility. For instance, as they approach retirement, an increasing proportion of their pension fund will be ‘lifestyled’, meaning it shifts to ‘safer’ havens such as cash, gilts or bonds, thereby limiting their overall level of investment risk.

Stay the course

At times like these, it is also vitally important to remember pension savings are designed for the long term. This means that, particularly in the case of younger investors, there should be plenty of time for markets to recover and pension pots to achieve growth aspirations before retirement income is required.

In addition, making decisions based on short-term economic upheaval can be extremely risky, with the potential to lock in losses following declines in investment values. Historically the best strategy is therefore generally to be patient, resist the urge to sell and stick to a long-term investing philosophy.

For those closer to retirement, now is a good time to take stock of your full complement of retirement resources before making any decisions, this will involve reviewing your pensions, and any other savings and investments. We can review your level of income and whether this has been adversely impacted by, for example, reduced savings rates or cut dividends.

Making your pension last

Another factor that could impact pension holders’ response to the pandemic relates to staggered retirement. As a result of increased longevity, a greater proportion of the population now withdraw more gradually from work, as retirees find an optimum worklife balance that accommodates their specific needs. This trend clearly provides for greater flexibility with part-time work enabling many pensioners to preserve retirement funds into later life – an increasingly popular choice for many.

Advice increasingly essential

Perhaps unsurprisingly given the heightened economic uncertainty, the past few months have seen a sharp rise in demand for professional financial advice. Indeed, it has never been more important for people to obtain sound advice in order to ensure their retirement plans remain firmly on track.

We’re here to help

So, if you are concerned about the impact of coronavirus on your plans, talk to us. We will help you see the bigger picture, weigh up all your options and make a balanced assessment of risks tailored specifically to your individual needs.

It is important to take professional advice before making any decision relating to your personal finances. Information within this newsletter is based on our current understanding of taxation and can be subject to change in future. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK; please ask for details. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from, taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor.

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily
be repeated. If you withdraw from an investment in the early years, you may not get back the full amount you invested. Changes in the rates of exchange may have an adverse effect on the value or price of an investment in sterling terms if it is denominated in a foreign currency. Taxation depends on individual circumstances as well as tax law and HMRC practice which can change.

The information contained within this newsletter is for information only purposes and does not constitute financial advice. The purpose of this newsletter is to provide technical and general guidance and should not be interpreted as a personal recommendation or advice.

The Financial Conduct Authority does not regulate advice on deposit accounts and some forms of tax advice.

Reassurance for Savers

In the spring, a surge was reported in the number of people enquiring about and opening savings accounts, as they sought to secure the best rates, before interest rate cuts fed through to savings rates and to benefit from a secure home for their money.

For UK savers, the Financial Services Compensation Scheme (FSCS) can provide a safeguard adding a valuable level of reassurance. If you have any money in an account with a UKauthorised bank, building society or credit union that fails, the FSCS will compensate you:

  • up to £85,000 per eligible person, per bank, building society or credit union
  • up to £170,000 for joint accounts. You do not need to take any action, the FSCS will automatically compensate you.

Attention to detail

The cover applies to the total sum of money held but because some banks share a banking licence, this will affect how much of your money is protected. If you hold over £85,000, it needs to be spread across different banks that don't share a licence to benefit from full FSCS protection. If you hold multiple accounts with banks that share the same banking licence, anything you hold over £85,000 will not be protected.

We can help you keep on top of your cash balances.