Market falls and pension saversPosted by Olderiswiser Editorial
Global markets have plunged in recent days but what does that mean for pension savers. Nathan Long explains.
• On average around two thirds of workplace pension default funds are invested in shares
• Average managed pension fund has risen 45% over last 5 years
If you are saving for retirement the chances are the bulk of your pension is invested in shares, meaning any drop in global stockmarkets will have a knock on impact to your pension. Those who are a long way from retirement should remain calm as any drop in value will be just a blip in their long term saving. It may not seem like it, but a fall in your pension value is actually a good thing for those far from retirement, as your next contribution will buy you more of your pension investments at a lower price.
People shouldn’t worry unduly about their final salary scheme. Any scheme shortfalls only become an issue if the sponsoring employer goes bust, and even then there is a well-funded lifeboat scheme in the form of the PPF to protect members’ pensions.
Anyone over age 50 should be more mindful of how stockmarkets affect them. How they intend to draw on their pension plan and when, will have a big impact on how their pension should be invested so making plans now is a good idea.
The group most at risk are those who are drawing from their pension. Anyone who is selling their investments to fund pension income should watch closely to ensure they can afford to continue to take these payments. If the falls continue, it may be wise to reduce or stop entirely withdrawals to ensure their pension lasts as long as they do. People who are taking only the income that is naturally produced by their pension investments will be largely unaffected by any share price falls.
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