At a glance

  • Stock market volatility in 2020 caused particular uncertainty for those investors closest to retirement, forcing some to change their plans
  • From delaying retirement to pausing pension contributions, there are several options for those whose finances have been hit by the pandemic
  • Few options are risk free and there may be a lot of decisions to make, however. Advice can be especially valuable as retirement nears

At a glance

  • Stock market volatility in 2020 caused particular uncertainty for those investors closest to retirement, forcing some to change their plans
  • From delaying retirement to pausing pension contributions, there are several options for those whose finances have been hit by the pandemic
  • Few options are risk free and there may be a lot of decisions to make, however. Advice can be especially valuable as retirement nears

At a glance

  • Stock market volatility in 2020 caused particular uncertainty for those investors closest to retirement, forcing some to change their plans
  • From delaying retirement to pausing pension contributions, there are several options for those whose finances have been hit by the pandemic
  • Few options are risk free and there may be a lot of decisions to make, however. Advice can be especially valuable as retirement nears

When you’re investing over a long period of time, you can take it for granted that there will be some bumpy moments along the way.

Those ups and downs are part and parcel of investing. As you approach retirement, however, any stock market volatility will invariably get the nerves jangling more than usual. The past year will have felt particularly uncertain, not just in terms of the vast and damaging consequences of the pandemic, but also the impact on investments and pensions too.

If you’re still a few years from retirement – say, five or more – you may feel comfortable with riding it out, especially if you plan to stay invested once you’ve retired. Recent circumstances will have raised concerns for many of those approaching retirement, however. Here we address some of the big questions you may have.

What should I do if my pension is falling?

This year has been particularly up and down, with markets falling and rising sharply in relatively short periods of time. Some of those near to retirement have responded by withdrawing some or all of their pension savings1, while others will have been tempted to move their money into lower-risk assets such as cash.

But if you intend to remain invested during retirement, it’s important not to panic. Selling out when markets are down has the effect of making those losses real and means that you also miss out on the recovery that will inevitably follow any downturn.

The key is to make sure that your portfolio remains diversified and still reflects your risk appetite and goals. If you’re not sure, it might be wise to take professional financial advice.

Is delaying retirement an option?

One in eight workers aged 50 and over have changed their retirement plans because of the effects of the pandemic, with 8% of those delaying their retirement and 5% planning to retire earlier, according to research by the Institute for Fiscal Studies2.

Those considering a delay will be hoping to give their pension pot more time to recover from volatility, while others may be feeling pessimistic about their longer-term household finances.

There are some advantages to delaying. Perhaps the most obvious is that your pensions and investments can recover any lost ground and then continue to grow. If you’re in a workplace pension you can continue to benefit from employer contributions, while from your state pension age you can boost your payments for every year that you defer taking it.

One approach is to stagger or phase your retirement, perhaps by working part-time for a period rather than taking a cliff-edge approach. You may be able to structure your investments to make this easier, perhaps by supplementing the reduced income with cash or dividends and leaving the rest of your pension where it is. Similarly, if you’re over 55 you could take some or all of the 25% tax-free cash you’re entitled to from your pension.

Should I reduce my contributions?

One in four pension savers have either reduced their contributions or stopped them altogether since the pandemic began, according to research published in October by Hargreaves Lansdown3. Those closest to retirement are among the savers cutting back, with 11% of over-55s stopping their pension contributions and 5% reducing them.

Stopping your contributions makes sense if you’re struggling to keep on top of your essential household bills. There might even be the option of taking a ‘holiday’ from pension contributions for a period. Check with your employer first, as this isn’t always offered.

If you can afford to, however, it’s worth keeping at least some contributions going. Maintaining them at some level also makes it easier to increase them again should you be able to at a later date. The added advantage of continuing your contributions is that you’ll benefit once your investments do begin to recover, while you also continue to benefit from employer contributions.

If you’re in a workplace pension, it’s worth seeing if you can increase your contributions. Check your contract, as there may be a trigger point at which your employer doesn’t just match your contributions but goes even further.

What can I do to bolster my pension investments?

If you’re planning to stay invested in retirement, you may be able to keep a decent amount of your portfolio in riskier assets, such as equities, which typically offer the highest growth over the long term.

The priority here will be to ensure that whatever you do, your portfolio is still diversified. In other words, your money is spread across different assets and investment in order to manage risk. A well-diversified fund will already have helped protect you from the worst of the volatility.

This is an area where it’s definitely worth taking financial advice, if you can – there are a lot of decisions to make before and at retirement, and a guiding hand can make a big difference to your long-term outcomes.

Should I access my pension?

Even if you haven’t retired, you can still access your pension pot from the age of 55. HM Revenue & Customs figures show that 347,000 people did just that in the three months to September, a 6% increase on the same period a year earlier4.

But while it can be tempting to use pension savings to bolster your finances, particularly if you’ve lost an income or seen it reduced, it’s a step to consider very carefully. For example, you may be cashing in a pension that has lost value because of market turbulence, meaning you’re crystallising those losses rather than allowing your pot to recover. You’re also reducing the size of the pension that you can take an income from later in life, when you’re no longer earning.

There are circumstances when it might make sense to access your pension before retiring. But the risks mean it’s important to seek advice if you’re thinking of taking this step.

Risk Warning: The value of an investment with St. James’s Place may fall as well as rise. You may get back less than the amount invested.

When you’re investing over a long period of time, you can take it for granted that there will be some bumpy moments along the way.

Those ups and downs are part and parcel of investing. As you approach retirement, however, any stock market volatility will invariably get the nerves jangling more than usual. The past year will have felt particularly uncertain, not just in terms of the vast and damaging consequences of the pandemic, but also the impact on investments and pensions too.

If you’re still a few years from retirement – say, five or more – you may feel comfortable with riding it out, especially if you plan to stay invested once you’ve retired. Recent circumstances will have raised concerns for many of those approaching retirement, however. Here we address some of the big questions you may have.

What should I do if my pension is falling?

This year has been particularly up and down, with markets falling and rising sharply in relatively short periods of time. Some of those near to retirement have responded by withdrawing some or all of their pension savings1, while others will have been tempted to move their money into lower-risk assets such as cash.

But if you intend to remain invested during retirement, it’s important not to panic. Selling out when markets are down has the effect of making those losses real and means that you also miss out on the recovery that will inevitably follow any downturn.

The key is to make sure that your portfolio remains diversified and still reflects your risk appetite and goals. If you’re not sure, it might be wise to take professional financial advice.

Is delaying retirement an option?

One in eight workers aged 50 and over have changed their retirement plans because of the effects of the pandemic, with 8% of those delaying their retirement and 5% planning to retire earlier, according to research by the Institute for Fiscal Studies2.

Those considering a delay will be hoping to give their pension pot more time to recover from volatility, while others may be feeling pessimistic about their longer-term household finances.

There are some advantages to delaying. Perhaps the most obvious is that your pensions and investments can recover any lost ground and then continue to grow. If you’re in a workplace pension you can continue to benefit from employer contributions, while from your state pension age you can boost your payments for every year that you defer taking it.

One approach is to stagger or phase your retirement, perhaps by working part-time for a period rather than taking a cliff-edge approach. You may be able to structure your investments to make this easier, perhaps by supplementing the reduced income with cash or dividends and leaving the rest of your pension where it is. Similarly, if you’re over 55 you could take some or all of the 25% tax-free cash you’re entitled to from your pension.

Should I reduce my contributions?

One in four pension savers have either reduced their contributions or stopped them altogether since the pandemic began, according to research published in October by Hargreaves Lansdown3. Those closest to retirement are among the savers cutting back, with 11% of over-55s stopping their pension contributions and 5% reducing them.

Stopping your contributions makes sense if you’re struggling to keep on top of your essential household bills. There might even be the option of taking a ‘holiday’ from pension contributions for a period. Check with your employer first, as this isn’t always offered.

If you can afford to, however, it’s worth keeping at least some contributions going. Maintaining them at some level also makes it easier to increase them again should you be able to at a later date. The added advantage of continuing your contributions is that you’ll benefit once your investments do begin to recover, while you also continue to benefit from employer contributions.

If you’re in a workplace pension, it’s worth seeing if you can increase your contributions. Check your contract, as there may be a trigger point at which your employer doesn’t just match your contributions but goes even further.

What can I do to bolster my pension investments?

If you’re planning to stay invested in retirement, you may be able to keep a decent amount of your portfolio in riskier assets, such as equities, which typically offer the highest growth over the long term.

The priority here will be to ensure that whatever you do, your portfolio is still diversified. In other words, your money is spread across different assets and investment in order to manage risk. A well-diversified fund will already have helped protect you from the worst of the volatility.

This is an area where it’s definitely worth taking financial advice, if you can – there are a lot of decisions to make before and at retirement, and a guiding hand can make a big difference to your long-term outcomes.

Should I access my pension?

Even if you haven’t retired, you can still access your pension pot from the age of 55. HM Revenue & Customs figures show that 347,000 people did just that in the three months to September, a 6% increase on the same period a year earlier4.

But while it can be tempting to use pension savings to bolster your finances, particularly if you’ve lost an income or seen it reduced, it’s a step to consider very carefully. For example, you may be cashing in a pension that has lost value because of market turbulence, meaning you’re crystallising those losses rather than allowing your pot to recover. You’re also reducing the size of the pension that you can take an income from later in life, when you’re no longer earning.

There are circumstances when it might make sense to access your pension before retiring. But the risks mean it’s important to seek advice if you’re thinking of taking this step.

Risk Warning: The value of an investment with St. James’s Place may fall as well as rise. You may get back less than the amount invested.

When you’re investing over a long period of time, you can take it for granted that there will be some bumpy moments along the way.

Those ups and downs are part and parcel of investing. As you approach retirement, however, any stock market volatility will invariably get the nerves jangling more than usual. The past year will have felt particularly uncertain, not just in terms of the vast and damaging consequences of the pandemic, but also the impact on investments and pensions too.

If you’re still a few years from retirement – say, five or more – you may feel comfortable with riding it out, especially if you plan to stay invested once you’ve retired. Recent circumstances will have raised concerns for many of those approaching retirement, however. Here we address some of the big questions you may have.

What should I do if my pension is falling?

This year has been particularly up and down, with markets falling and rising sharply in relatively short periods of time. Some of those near to retirement have responded by withdrawing some or all of their pension savings1, while others will have been tempted to move their money into lower-risk assets such as cash.

But if you intend to remain invested during retirement, it’s important not to panic. Selling out when markets are down has the effect of making those losses real and means that you also miss out on the recovery that will inevitably follow any downturn.

The key is to make sure that your portfolio remains diversified and still reflects your risk appetite and goals. If you’re not sure, it might be wise to take professional financial advice.

Is delaying retirement an option?

One in eight workers aged 50 and over have changed their retirement plans because of the effects of the pandemic, with 8% of those delaying their retirement and 5% planning to retire earlier, according to research by the Institute for Fiscal Studies2.

Those considering a delay will be hoping to give their pension pot more time to recover from volatility, while others may be feeling pessimistic about their longer-term household finances.

There are some advantages to delaying. Perhaps the most obvious is that your pensions and investments can recover any lost ground and then continue to grow. If you’re in a workplace pension you can continue to benefit from employer contributions, while from your state pension age you can boost your payments for every year that you defer taking it.

One approach is to stagger or phase your retirement, perhaps by working part-time for a period rather than taking a cliff-edge approach. You may be able to structure your investments to make this easier, perhaps by supplementing the reduced income with cash or dividends and leaving the rest of your pension where it is. Similarly, if you’re over 55 you could take some or all of the 25% tax-free cash you’re entitled to from your pension.

Should I reduce my contributions?

One in four pension savers have either reduced their contributions or stopped them altogether since the pandemic began, according to research published in October by Hargreaves Lansdown3. Those closest to retirement are among the savers cutting back, with 11% of over-55s stopping their pension contributions and 5% reducing them.

Stopping your contributions makes sense if you’re struggling to keep on top of your essential household bills. There might even be the option of taking a ‘holiday’ from pension contributions for a period. Check with your employer first, as this isn’t always offered.

If you can afford to, however, it’s worth keeping at least some contributions going. Maintaining them at some level also makes it easier to increase them again should you be able to at a later date. The added advantage of continuing your contributions is that you’ll benefit once your investments do begin to recover, while you also continue to benefit from employer contributions.

If you’re in a workplace pension, it’s worth seeing if you can increase your contributions. Check your contract, as there may be a trigger point at which your employer doesn’t just match your contributions but goes even further.

What can I do to bolster my pension investments?

If you’re planning to stay invested in retirement, you may be able to keep a decent amount of your portfolio in riskier assets, such as equities, which typically offer the highest growth over the long term.

The priority here will be to ensure that whatever you do, your portfolio is still diversified. In other words, your money is spread across different assets and investment in order to manage risk. A well-diversified fund will already have helped protect you from the worst of the volatility.

This is an area where it’s definitely worth taking financial advice, if you can – there are a lot of decisions to make before and at retirement, and a guiding hand can make a big difference to your long-term outcomes.

Should I access my pension?

Even if you haven’t retired, you can still access your pension pot from the age of 55. HM Revenue & Customs figures show that 347,000 people did just that in the three months to September, a 6% increase on the same period a year earlier4.

But while it can be tempting to use pension savings to bolster your finances, particularly if you’ve lost an income or seen it reduced, it’s a step to consider very carefully. For example, you may be cashing in a pension that has lost value because of market turbulence, meaning you’re crystallising those losses rather than allowing your pot to recover. You’re also reducing the size of the pension that you can take an income from later in life, when you’re no longer earning.

There are circumstances when it might make sense to access your pension before retiring. But the risks mean it’s important to seek advice if you’re thinking of taking this step.

Risk Warning: The value of an investment with St. James’s Place may fall as well as rise. You may get back less than the amount invested.

 

References

1. Pensions Age, Number of savers withdrawing entire pension pot rises by 94%, November 2020

2. IFS, Coronavirus alters the retirement plans of one in eight older workers, September 2020

3. Money Marketing, One in four cutting pension contributions during lockdown, October 2020

4. HMRC, Flexible payments from pensions: October 2020 Official Statistics, October 2020

Links from this website exist for information only and we accept no responsibility or liability for the information contained on any such sites. The existence of a link to another website does not imply or express endorsement of its provider, products or services by St. James's Place. Please note that clicking a link will open the external website in a new window or tab.

 

References

1. Pensions Age, Number of savers withdrawing entire pension pot rises by 94%, November 2020

2. IFS, Coronavirus alters the retirement plans of one in eight older workers, September 2020

3. Money Marketing, One in four cutting pension contributions during lockdown, October 2020

4. HMRC, Flexible payments from pensions: October 2020 Official Statistics, October 2020

Links from this website exist for information only and we accept no responsibility or liability for the information contained on any such sites. The existence of a link to another website does not imply or express endorsement of its provider, products or services by St. James's Place. Please note that clicking a link will open the external website in a new window or tab.

 

References

1. Pensions Age, Number of savers withdrawing entire pension pot rises by 94%, November 2020

2. IFS, Coronavirus alters the retirement plans of one in eight older workers, September 2020

3. Money Marketing, One in four cutting pension contributions during lockdown, October 2020

4. HMRC, Flexible payments from pensions: October 2020 Official Statistics, October 2020

Links from this website exist for information only and we accept no responsibility or liability for the information contained on any such sites. The existence of a link to another website does not imply or express endorsement of its provider, products or services by St. James's Place. Please note that clicking a link will open the external website in a new window or tab.

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