Your pension savings are invested, and until you get close to your selected retirement age, the majority of your fund is invested in equities (i.e. company shares).
What will happen to my pension fund in the long term?
The global spread of the coronavirus has been an important contributor to the recent volatility in equity (company shares) markets. Markets tend to react to uncertainty, so as new cases arise and the situation evolves, it’s likely that global markets will be impacted further – potentially for a prolonged period of time. This impact could be both positive and negative at different times as market sentiment develops. It’s important to consider these changes in the context of your long-term investment objectives and remember that your pension is a long-term financial savings product. The below image (provided by Standard Life) shows previous significant financial shocks and subsequent market performance over the last 35 years.
Please note that past performance is no guarantee of future results
With respect to the default investment fund, any amendment action would be based on a strategic (i.e. longer term) view of the appropriate asset allocation for the fund, rather than the short-term. This long-term view is very important, from a pension investment perspective – as when markets start to climb again, it is important that you are invested in such a way that you benefit from any recovery.
Should I stop making pension contributions for the time being?
Continuing to make contributions is important as well – contributions made now would be at a low cost – meaning that when markets improve you will benefit from this growth.
I am retiring soon – have I got time for my fund to return to its previous level?
If you are in the years approaching retirement and worried about the impact of the recent stock market performance, it is important to remember that default investment funds are designed to reduce the amount of equities invested in a members policy as they approach the point of taking benefits. This means that if you are close to taking benefits, part of your fund will be invested in lower risk investments, rather than wholly in equities.
There is a lot of governance around the default fund – in order to ensure that it remains appropriate for members over the longer term.
Should I change where my fund is invested?
Selecting your own investment funds requires a commitment to monitor and review, and the appropriate knowledge and experience to do so. We would recommend that you seek individual financial advice before making any changes.
If you have selected your own investment funds, we recommend that you seek individual financial advice to discuss the continued appropriateness of your selections.
Where can I get more help?
If you would like further information or advice, please contact Brunsdon Financial on:
Email: enquire@brunsdonfinancial.co.uk
Telephone: 01452 623623
The information provided does not constitute advice or recommendation. Any information regarding tax treatment is based on our understanding of current tax law and HM Revenue and Customs practice, all of which may be subject to change. Your personal circumstances may also impact on tax treatment.
