The recent coronavirus pandemic has caused significant global stock market volatility and many people are worried about the impact on their pension, savings and investments.
Keep calm and carry on
The worst thing to do is sell investments during a period of volatility, especially if your long-term objectives haven’t changed. If the markets have fallen, panic-selling may often be a natural first reaction to a fall in the value of your fund, but selling now will only crystalise any losses to your portfolio.
Look for opportunities
In some situations, this may be a good time to re-balance portfolios, or for some investors to acquire additional investment opportunities while prices are lower. For other investors that hold sizeable investments, or for those concerned about the impact on pension income, we’d urge you not to panic. Your pension and investments should always be seen as long-term commitments.
First steps to plan for retirement
If you are concerned about how the current market volatility may affect your plans for later in life, an independent financial adviser can help you work through a personal cash flow forecast in order to evaluate your objectives. It’s important to understand your expenditure first, after which income and investments or pensions can be assessed to see how and if they can meet your expenditure needs. Once we know how and where income will come from, the next steps can be carefully considered.
Using your pension
Pension freedoms mean that you can drawdown from your pension from the age of 55 (57 from 2028), although there are benefit and tax considerations to bear in mind if you choose to do this. Pensions do not always have to be used as your main source of retirement income and building a strategy between your pension and non-pension savings can result in much more effective planning. The first priority has to be your own income needs in retirement, but other considerations such as income or Inheritance Tax may also need to be considered.
After reviewing your income and expenditure needs, mitigating Inheritance Tax is often the next financial objective for many individuals at or in retirement. There are many solutions to consider, that can range from gifting monies away or keeping monies in an Inheritance Tax efficient savings vehicle.
Thinking of others
Planning ahead for the care of your loved ones is an important consideration which has come to the front of many people’s minds during the recent pandemic. There are a number of options available to people to help protect themselves and provide for loved ones but it is always important to ensure the correct option is picked.