Pension: Those nearing retirement facing ‘particularly acute’ issues – three steps to take

Pension income can come from private arrangements as well as a state pension. While private pensions may be larger than a state pension, they are much more likely to be volatile which is a real problem at the moment.


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Private pensions are usually dependent on the performance of the assets they’re invested in, which can in turn be dramatically impacted by unforeseen problems.

Coronavirus has seen various investment markets drop in recent months and there are worries that economies across the globe will struggle to bounce back once this all ends.

Because of fears like these, some people may be looking at their pension pots apprehensively, worrying that if they don’t take action now further problems will emerge down the line.

A recently completed survey from Fidelity seems to show that a sizable chunk of the population approaching retirement are looking to make drastic changes.

Fidelity recently conducted an “Investor Survey” which, as they detailed, captured sentiment among the UK population since the start of the coronavirus pandemic.

The research they conducted was based on a sample of 1,000 people which was representative of the UK at large.

The results found that almost half (48 percent) of respondents saw a fall in value in their retirement savings.

More than half revealed that they were worried about the level of income their pots would provide them with in retirement, with 54 percent detailing that they would likely need to defer their retirement plans and continue working for longer than anticipated.

Maike Currie, a Director at Fidelity International, commented on the findings: “Our research clearly shows investors are worried about protecting their pension pot post-pandemic.

“While investors of all ages will likely have seen the value of their retirement savings fall earlier this year as stock markets plummeted, the uncertainties facing those closest to retirement are particularly acute.”

Fortunately, Maike went on to highlight that people approaching retirement are not completely devoid of options: “Deferring your retirement isn’t the only option though, and there are other steps you can take to shore up your retirement finances.

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“The key is to make sure you’re informed, and to understand how your position might have changed.”

She highlighted three “retirement rules of thumb” which can help people evaluate their retirement needs, how much they’ll actually need and how much they should currently be saving.

Maike detailed that: “Thinking carefully about these questions can help you to understand whether you need to change your plans to ensure you achieve your long-term goals.

“And if you’re at all unsure of what to do it’s worth speaking to a qualified financial adviser”

Fidelity’s three steps for protecting a post-pandemic pension pot are as follows:


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Don’t discount an annuity

According to the Money Advice Service, an annuity is a type of retirement income product that people buy with some or all of their pension pot.

It pays a regular retirement income either for life or for a set period.

Maike kicks off the list by highlighting that this could be a first port of call: “While underlying annuity interest rates are low, remember that if you have a medical condition, you may be able to get an enhanced rate as this will be based on your life expectancy – therefore, make sure you complete a medical questionnaire thoroughly.

“Investigate this option and see what rate you can obtain – most rates will be different from person to person.

This way you can make an informed decision as to whether a) you can afford to retire on the annuity income or b) if you think it is worthwhile deferring in the hope of securing a higher income – through your health deteriorating or benefiting from mortality gain (although of course none of these are guaranteed to happen).

Keep contributing

Finding the will or ability to contribute to a pension can be very difficult at the moment.

Because of coronavirus, millions have seen their income reduced or lost employment altogether.

The idea of putting money into a pension could feel like the wrong choice at the moment but Maike warns that now is the time to embrace contributions as much as possible: “Keeping up your pension contributions during difficult times might seem like a daunting task, but it’s important to try and continue with your pension contributions to make the most of tax relief and pound cost averaging.

“If you are going on ‘furlough’, unless told otherwise, both your own pension contributions and your employer’s will continue at the current rate but will be based on the amount you are paid while on furlough.

“Think carefully before you reduce or suspend your contributions, or opt out of your pension plan, as it will have an impact on the value of your pension savings when you come to retire.”

Keep an eye on your income

Income needs may force people to sell certain assets just to keep their head afloat.

While this may be unavoidable in certain circumstances, Maike detailed that some people may not need the income at all: “Company dividend cuts may be a concern as this will impact your income payments.

“Unless you have other income sources, such as rental income, guaranteed pensions or a ‘rainy day’ fund then you may be forced to sell units.

“This is why, if you are investing in drawdown for retirement, you need to ensure you have at least six to 12 months of savings in cash to help see you through the bad times.

“If you are receiving a regular income through drawdown, now would be a good time to reduce withdrawals to protect the fund as you are unlikely to need as much income – with everyone locked down, your discretionary spending will have reduced.”

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