At a glance

  • The coronavirus crisis has affected the financial plans of millions, including people who are already in retirement
  • Investment market falls have impacted the value of pension drawdown pots and increased the risk of taking too much income from them
  • There are a number of ways to protect retirement incomes and identify possible savings or even windfalls

At a glance

  • The coronavirus crisis has affected the financial plans of millions, including people who are already in retirement
  • Investment market falls have impacted the value of pension drawdown pots and increased the risk of taking too much income from them
  • There are a number of ways to protect retirement incomes and identify possible savings or even windfalls

At a glance

  • The coronavirus crisis has affected the financial plans of millions, including people who are already in retirement
  • Investment market falls have impacted the value of pension drawdown pots and increased the risk of taking too much income from them
  • There are a number of ways to protect retirement incomes and identify possible savings or even windfalls

When retirement plans can be in place for 20 years or more, there are clearly going to be some ups and downs along the way. Just as investors will invariably experience several bouts of volatility on the road to retirement, those already retired will have to navigate choppy waters to keep their financial plans on course.

This year has offered up a particularly stark example, in the form of a pandemic that has threatened to upset even the best laid plans. For those approaching pension age, it might mean having to think about working for longer or accessing their pension pot earlier. There may also be difficult decisions for those who have already retired and begun to take income from their pension funds. Pension and investment pots have been affected by market falls, while those with most of their savings in cash have seen returns driven down further by fresh interest rate cuts.

Some retirees will have felt little impact, particularly if their affairs are managed by professional advisers. Nevertheless, many will be concerned at what the crisis might mean for their finances. So, here are a few things to think about as you take stock of your situation.

Weigh up your income needs

Stock market volatility can have an outsized impact on pension drawdown funds. Making withdrawals from your drawdown fund during a market downturn is more costly than doing so when the market is strong and is especially risky earlier on in retirement, when poor returns can make it hard to recover from losses. And at any point in your retirement, withdrawing your usual level of income when your fund may be falling in value will mean that you’ll need to cash in more of your pot to maintain your income over the longer term.

If you take income directly from your pension fund, ask yourself if you can reduce that income level or take it from another source, such as cash savings. Your income may not be affected by market falls – but it’s worth reviewing it just to make sure, because taking too much income when markets are falling could leave you short later on.

Assess your options

From workplace and private pensions to savings, investments and property, you may have a range of different financial resources to call on in retirement.

Exactly how you use them will depend on factors such as the way they are taxed, the amount of cash you might need at short notice and how much you want to leave to others when you die. A professional financial adviser can help you work out how to get the best out of the different assets you have. Ongoing advice can be especially important in retirement, particularly if you remain invested.

Track down a potential windfall

If you went through several employers in your working life you may have opened a pension plan or two that you lost touch with along the way, perhaps when you moved address. Some 1.6m pension pots worth an average of £13,000 remain unclaimed, according to the Association of British Insurers.1

To see if you have a lost or unclaimed pension, see the government’s Pension Tracing Service website or call 0800 731 0193.

Go back to basics

Sales of annuities, with which retirees can convert their pension pots into a secure income for life, have plummeted since the pension ‘freedoms’ – which gave people greater access to their pension funds – launched in 2015. But annuities are still available, and for nervous investors they can provide a steady, guaranteed income that offers valuable peace of mind. Most annuities are for life, but there are also fixed-term annuities around that pay an income for a certain number of years. You don’t need to use all your pension pot to buy an annuity – you can take just a portion and keep the rest invested.

Return to the budget drawing board

Your retirement income plans may have been based on your expected spending patterns in retirement. But your outgoings may have changed since the pandemic began, particularly if you used to dine out regularly or enjoy travelling. So it might be a good time to draw up a new budget that shows you what you have coming in (including state and other pension payments) and the money that’s going out. Once you’ve accounted for your weekly and monthly spending you may be able to identify potential savings, any avoidable expenditure or ways of reducing the income you take from savings and investments.

Watch out for scams

The coronavirus crisis has unfortunately triggered an increase in fraudsters seeking to scam people out of money. Pensioners have been a target of several scams, including those selling high-risk, unregulated investments.

The golden rule when contacted out of the blue about any pension or investment opportunity is to assume it’s dodgy and quickly hang up. Check out the Financial Conduct Authority’s ScamSmart page for more on pension scams and how to avoid them.

When retirement plans can be in place for 20 years or more, there are clearly going to be some ups and downs along the way. Just as investors will invariably experience several bouts of volatility on the road to retirement, those already retired will have to navigate choppy waters to keep their financial plans on course.

This year has offered up a particularly stark example, in the form of a pandemic that has threatened to upset even the best laid plans. For those approaching pension age, it might mean having to think about working for longer or accessing their pension pot earlier. There may also be difficult decisions for those who have already retired and begun to take income from their pension funds. Pension and investment pots have been affected by market falls, while those with most of their savings in cash have seen returns driven down further by fresh interest rate cuts.

Some retirees will have felt little impact, particularly if their affairs are managed by professional advisers. Nevertheless, many will be concerned at what the crisis might mean for their finances. So, here are a few things to think about as you take stock of your situation.

Weigh up your income needs

Stock market volatility can have an outsized impact on pension drawdown funds. Making withdrawals from your drawdown fund during a market downturn is more costly than doing so when the market is strong and is especially risky earlier on in retirement, when poor returns can make it hard to recover from losses. And at any point in your retirement, withdrawing your usual level of income when your fund may be falling in value will mean that you’ll need to cash in more of your pot to maintain your income over the longer term.

If you take income directly from your pension fund, ask yourself if you can reduce that income level or take it from another source, such as cash savings. Your income may not be affected by market falls – but it’s worth reviewing it just to make sure, because taking too much income when markets are falling could leave you short later on.

Assess your options

From workplace and private pensions to savings, investments and property, you may have a range of different financial resources to call on in retirement.

Exactly how you use them will depend on factors such as the way they are taxed, the amount of cash you might need at short notice and how much you want to leave to others when you die. A professional financial adviser can help you work out how to get the best out of the different assets you have. Ongoing advice can be especially important in retirement, particularly if you remain invested.

Track down a potential windfall

If you went through several employers in your working life you may have opened a pension plan or two that you lost touch with along the way, perhaps when you moved address. Some 1.6m pension pots worth an average of £13,000 remain unclaimed, according to the Association of British Insurers.1

To see if you have a lost or unclaimed pension, see the government’s Pension Tracing Service website or call 0800 731 0193.

Go back to basics

Sales of annuities, with which retirees can convert their pension pots into a secure income for life, have plummeted since the pension ‘freedoms’ – which gave people greater access to their pension funds – launched in 2015. But annuities are still available, and for nervous investors they can provide a steady, guaranteed income that offers valuable peace of mind. Most annuities are for life, but there are also fixed-term annuities around that pay an income for a certain number of years. You don’t need to use all your pension pot to buy an annuity – you can take just a portion and keep the rest invested.

Return to the budget drawing board

Your retirement income plans may have been based on your expected spending patterns in retirement. But your outgoings may have changed since the pandemic began, particularly if you used to dine out regularly or enjoy travelling. So it might be a good time to draw up a new budget that shows you what you have coming in (including state and other pension payments) and the money that’s going out. Once you’ve accounted for your weekly and monthly spending you may be able to identify potential savings, any avoidable expenditure or ways of reducing the income you take from savings and investments.

Watch out for scams

The coronavirus crisis has unfortunately triggered an increase in fraudsters seeking to scam people out of money. Pensioners have been a target of several scams, including those selling high-risk, unregulated investments.

The golden rule when contacted out of the blue about any pension or investment opportunity is to assume it’s dodgy and quickly hang up. Check out the Financial Conduct Authority’s ScamSmart page for more on pension scams and how to avoid them.

When retirement plans can be in place for 20 years or more, there are clearly going to be some ups and downs along the way. Just as investors will invariably experience several bouts of volatility on the road to retirement, those already retired will have to navigate choppy waters to keep their financial plans on course.

This year has offered up a particularly stark example, in the form of a pandemic that has threatened to upset even the best laid plans. For those approaching pension age, it might mean having to think about working for longer or accessing their pension pot earlier. There may also be difficult decisions for those who have already retired and begun to take income from their pension funds. Pension and investment pots have been affected by market falls, while those with most of their savings in cash have seen returns driven down further by fresh interest rate cuts.

Some retirees will have felt little impact, particularly if their affairs are managed by professional advisers. Nevertheless, many will be concerned at what the crisis might mean for their finances. So, here are a few things to think about as you take stock of your situation.

Weigh up your income needs

Stock market volatility can have an outsized impact on pension drawdown funds. Making withdrawals from your drawdown fund during a market downturn is more costly than doing so when the market is strong and is especially risky earlier on in retirement, when poor returns can make it hard to recover from losses. And at any point in your retirement, withdrawing your usual level of income when your fund may be falling in value will mean that you’ll need to cash in more of your pot to maintain your income over the longer term.

If you take income directly from your pension fund, ask yourself if you can reduce that income level or take it from another source, such as cash savings. Your income may not be affected by market falls – but it’s worth reviewing it just to make sure, because taking too much income when markets are falling could leave you short later on.

Assess your options

From workplace and private pensions to savings, investments and property, you may have a range of different financial resources to call on in retirement.

Exactly how you use them will depend on factors such as the way they are taxed, the amount of cash you might need at short notice and how much you want to leave to others when you die. A professional financial adviser can help you work out how to get the best out of the different assets you have. Ongoing advice can be especially important in retirement, particularly if you remain invested.

Track down a potential windfall

If you went through several employers in your working life you may have opened a pension plan or two that you lost touch with along the way, perhaps when you moved address. Some 1.6m pension pots worth an average of £13,000 remain unclaimed, according to the Association of British Insurers.1

To see if you have a lost or unclaimed pension, see the government’s Pension Tracing Service website or call 0800 731 0193.

Go back to basics

Sales of annuities, with which retirees can convert their pension pots into a secure income for life, have plummeted since the pension ‘freedoms’ – which gave people greater access to their pension funds – launched in 2015. But annuities are still available, and for nervous investors they can provide a steady, guaranteed income that offers valuable peace of mind. Most annuities are for life, but there are also fixed-term annuities around that pay an income for a certain number of years. You don’t need to use all your pension pot to buy an annuity – you can take just a portion and keep the rest invested.

Return to the budget drawing board

Your retirement income plans may have been based on your expected spending patterns in retirement. But your outgoings may have changed since the pandemic began, particularly if you used to dine out regularly or enjoy travelling. So it might be a good time to draw up a new budget that shows you what you have coming in (including state and other pension payments) and the money that’s going out. Once you’ve accounted for your weekly and monthly spending you may be able to identify potential savings, any avoidable expenditure or ways of reducing the income you take from savings and investments.

Watch out for scams

The coronavirus crisis has unfortunately triggered an increase in fraudsters seeking to scam people out of money. Pensioners have been a target of several scams, including those selling high-risk, unregulated investments.

The golden rule when contacted out of the blue about any pension or investment opportunity is to assume it’s dodgy and quickly hang up. Check out the Financial Conduct Authority’s ScamSmart page for more on pension scams and how to avoid them.

 

References

  1. Association of British Insurers, ‘The UK’s lost pension mountain could be worth £20 billion,’ October 2018

 

References

  1. Association of British Insurers, ‘The UK’s lost pension mountain could be worth £20 billion,’ October 2018

 

References

  1. Association of British Insurers, ‘The UK’s lost pension mountain could be worth £20 billion,’ October 2018

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