The pension market is ever changing, and this year has seen more changes than most as the Covid-19 pandemic affects the financial services industry. Here is an update on some key changes to help you plan your pension arrangements.
Has my pension changed in value?
At the start of lockdown, stock markets fell considerably and while they have regained much of their value pre-March, they are likely to remain volatile for a while. Pension funds are often mainly invested in stock markets, so these fluctuations can impact directly on the value of pension funds. If you track the value of your pension closely, you may have seen sharp changes in your fund this year, and you may be concerned about its value.
Do I need to change my pension?
As a general guide, if you have many years to go before you retire, we would advise that you don’t need to take specific action. Pensions are a long-term investment and over the life time of your investment, this is a short-term fluctuation. Markets should hopefully recover any short-term losses over time, and markets have already risen strongly since the falls in March.
Do you have a plan?
We always discuss with clients their long-term plan aims. This should not just be ‘I want as much money as possible’, a proper plan should have a proper aim to be meaningful. You may want to retire early, but why? This could be to spend more time with your grandchildren, or to go travelling, for example. Having a deliberate aim in mind should help you to plan more effectively in the meantime. Don’t let short term fluctuations or changes derail your plan, but let us help you achieve it with you.
If your pension isn’t being managed speak to us and we will be able to make specific recommendations based on:
– Your aims
– The length of time you have before you retire
– The amount you have in your pension pot
– Whether your funds are invested appropriately for you personally
– How much you need to save
(The state pension is unaffected by fluctuations to the stock market.)
Minimum age for drawing a personal pension
The government recently confirmed again that the minimum age for drawing a personal pension in the UK is to rise to 57. Currently savers who pay into a personal pension can access their money at 55. This comes as no surprise as the minimum pension age was set to be 10 years below state retirement age – currently 67.
We have no timetable for this legislation yet, but if you would like to understand the potential impact, please give us a call.
Changes to pension tax relief
We mentioned in February that we were anticipating changes in pension tax relief for higher rate tax payers. This change didn’t take place in the Spring budget. However after the financial impact of Covid-19 the government will be looking to ways to balance the books. One way or another they will have to raise a large amount of money in the future.
Many industry commentators are once again speculating that this change will be announced. If you are a higher rate tax payer, talk to us about the most efficient way to save for your future. Please get in touch and arrange a meeting with one of our independent financial advisers.
Pensions are a very personal investment and any articles we write can only ever give an overview. To talk in detail about your personal circumstances, your pension pot and the right course of action for you, please call us on 01543 410512 for an appointment with one of our Pensions Advisers.