Perhaps the most common investment advice is to stay invested. But with markets being so volatile, the ease of sticking to that advice has been sorely tested in 2020. Even though we’ve seen global markets bounce sharply from their March lows, understandably there will still be those investing for retirement who remain worried and wonder what the best approach is for the remainder of the year and beyond.
There are lots of variables in retirement: how long people will live for, the costs of goods and services they will need, interest rates available on their accumulated savings, and so on. But once you have retired, investing is anything but straightforward.
The coronavirus (COVID-19) is having a widespread impact across all aspects of financial life, including retirement plans. The current global stock market turbulence, as a consequence of COVID-19, will no doubt be concerning for individuals whose pension savings are invested partly or fully during these volatile market conditions.
In his 2015 Spring Budget, then-chancellor George Osborne introduced sweeping changes to the way that pensions are taxed. The new pension freedom rules have led to the over-55s being faced with a variety of different choices when taking and investing their nest eggs.
Prior to April 2015, when most people with a defined contribution pension reached retirement age, the only option available was to buy an annuity, which involved using pension savings to purchase a guaranteed income for life.
The questions our clients almost always ask us are: ‘Will I be able to retire when I want to? Will I run out of money? How can I guarantee the kind of retirement I want?’
Worryingly, it’s been well documented that many Britons aren’t saving enough in their pension for their retirement. Figures published by HM Revenue & Customs (HMRC)[1] in September 2019 show that the annual average contributions that every individual makes decreased in 2017/18 compared to 2016/17.
The pension freedoms, introduced on 6 April 2015, have given retirees a whole host of new options. There is no longer a compulsory requirement to purchase an annuity (a guaranteed income for life) when you retire. The introduction of pension freedoms brought about fundamental changes to the way we can access our pension savings.
There is now much greater flexibility around how you take your benefits from Money Purchase Pension (Defined Contribution) schemes, which include Self-Invested Personal Pensions (SIPPs).
We all have different financial goals and aspirations in life, yet these goals can often seem out of reach. In today’s complex financial environment, achieving your financial goals may not be that straightforward.
This is where financial planning is essential. Designed to help secure your financial future, a financial plan seeks to identify your financial goals, prioritise them and then outline the exact steps that you need to take to achieve your goals.
Saving for retirement is one of our greatest financial priorities, especially as life expectancy is growing and retirements are likely to last longer. It may be the case that you’d prefer to take the reins and have more control over your pension pot. For appropriate investors, one option to consider is a Self-Invested Personal Pension (SIPP).
In trying to answer these questions, you face a problem. Because of longevity trends, we are on average living longer. With longevity increasing, your wealth may have to provide you and your spouse or partner with an adequate income for 30 or even 40 years.
Your retirement might seem like a far-off prospect, but knowing how you can access your pension pot can help you understand how best to build for the future you want.
