Expert gives top advice on pension planning in lockdown

PENSION pots should not be overlooked when spring clean to-do lists are being created

amid the UK’s coronavirus lockdown, a financial adviser has warned.

With power washing, wardrobe clear outs and garden chores all filling the time of self-

isolating individuals, a little pension pot quality time should also be of high priority.

The advice comes from Rachael Bell who says that, while the time is not necessarily right for

immediate action due to market volatility, pension holders should be making moves to

acquaint themselves with their funds.

She added: “Whether you are in retirement, or planning for it from a long way out, market

volatility presents challenges and opportunities.

“After more than 10 years of a rising market, investors could be forgiven for assuming that

markets would keep marching onwards. But recent volatility sparked by coronavirus

concerns provides a powerful reminder that things can change quickly.

“The fact that stock markets have fallen so sharply is, of course, indicative of significant

selling pressure. But deviating from your long-term plan in such a febrile market environment

is typically an emotional response, not a disciplined one.”

The considerations for pension holders typically vary depending on their stage of life, their

requirements and attitudes to risk.

Over the course of the last month, Rachael, the principal of Rachael Bell Wealth Management, has spent time making welfare calls to all of the business’ clients to ensure

any questions they had were answered and to calm any nervousness about the downwards

trend of global markets.

“Market volatility is normal, as is the feeling of being overwhelmed by the value of your

investment portfolio moving up or down, said Rachael.

“But it’s worth remembering that market rises and falls are part of investing. No one likes to

lose money, but history suggests that selling is usually an inappropriate response to

unfolding events.”

Rachael today shares her thoughts on what this means for people of different ages.

20s - 30s

“No one knows how future events will play out, or how markets will react in the coming

weeks and months. What we do know is that whether the next move for markets is up or

down, it shouldn’t matter to investors who have the time to ride out the peaks and troughs.

“It's important to remember that corrections are an inevitable feature of investing, and that

markets do recover in time.

“Difficult though it can be, it’s important to sit tight and keep sight of your long-term

objectives. At this stage of life, it’s far more important to have a solid retirement plan with a

portfolio that reflects your long-term investing horizon.

“It’s also worth remembering that if you are contributing to a pension or ISA every month,

you will now be benefiting from lower asset prices and the potential boost provided by

pound-cost averaging. So, it might even be a good time to consider increasing your

contributions, if you can.

40s – 50s

“For many investors, particularly those who have built up significant wealth, current market

turmoil could prompt discussions about reducing risk.

“That’s not surprising when you consider that research shows the emotional pain of a loss is

twice as powerful as the feeling of making a gain.”

“But while your portfolio may benefit from some healthy rebalancing right now, a wholesale

shift towards lower risk assets would crystallise losses and increase the probability of

missing the recovery in markets when it comes.

“If you are due to retire in the next five years, then it may be worth thinking about adding or

increasing your allocation to less volatile investments.

“But if you’re in good health, you should probably still focus your sights as long term as

possible, because retirement could last 30 years or more. Your financial adviser will be able

to determine what mix of investments is right for you, based on your priorities and ultimate

retirement date.”

Aged 55+

“It can be a worrying time if you need your pension savings to meet living costs. Market

swings do disproportionately affect older investors who are taking income from their

retirement pots.

“This is because a larger proportion of the portfolio must be drawn to maintain the same

income. With progressively less in the pot, it becomes more difficult for the fund to bounce

on any market recovery.

“If you can, you should try to avoid taking money from your investments during periods of

volatility. If you can reduce your level of pension withdrawals – or even put them on hold for

a while – it could be better to dip into cash savings.

“Alternatively, if you are currently taking your annual income requirements as a lump sum,

consider changing to a monthly or quarterly withdrawal to reduce the risk of realising capital

during this market trough.

“If you’re eligible to start drawing it, your State Pension could also provide some income

without the need to sell investments.

Rachel Bell

“Delaying your retirement is a further option – although it may be a last resort. Continuing to work is a way to avoid withdrawing from retirement assets, and you’ll have more money to

add to your pension pot.“


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