Can you afford to retire amid market volatility?

The Covid-19 pandemic caused market volatility earlier this year and, while there has been a recovery, investment values may still be lower than they were at the beginning of 2020. In addition, knock-on economic concerns are also weighing on the minds of investors. So much so that some are considering changing their retirement plans as they’re worried they can’t afford to retire.

Almost one in five (18%) of people now plan to delay retirement, according to a survey from Aegon. Seeing pension values fall and the possibility of further volatility on the horizon can make it seem as through retirement plans have gone off track. However, this isn’t necessarily the case and you may still have enough to retire on.

Before you access your pension or delay your plans, it’s important to assess your own circumstances.

How has the market volatility affected your pension and other assets?

You no doubt saw headlines about stock markets ‘crashing’ and ‘sharp falls’ earlier this year. It can be alarming to read these, especially if you’re nearing retirement.

However, these headlines focused on the stock market alone, and investment portfolios typically hold a range of assets, including bonds and cash. As a result, these assets can act as a buffer when stock markets are volatile. Most pension funds will automatically reduce investment risk as you approach retirement age too. So, you may have been less exposed to the volatility than you first thought.

While your pension and other investments may have dipped, it’s unlikely they did to the extent headlines suggest. The first step should be to review your own pensions and their current value.

Knowing that your investments are lower in value than at the beginning of the year can be disheartening. However, when you take a long-term view, you’ve still benefited from saving into a pension, thanks to investment returns, tax relief, and employer contributions.

Before you make any changes to retirement plans, you should take stock of pension values.

How much is enough to retire on?

The next step is to understand what you need so you can afford to retire.

There are numerous factors to take into consideration here, including your desired lifestyle and life expectancy. You need to calculate how much you need annually throughout retirement.

Often retirees find their general outgoings fall, as they are no longer commuting to work and may have paid off the mortgage, for example. However, there may also be big one-off expenses to consider too. Perhaps you’re hoping to travel more, help children financially or renovate your home?

This is a time to think about what kind of retirement lifestyle you want and the goals you’d like to reach.

Once you’ve thought about your lifestyle, you should consider how this matches up with your pensions and other assets. It can be difficult to understand how the lump sum in your pension will provide a regular income and whether it’s enough.

This is where financial planning can help. We’ll help you see how your savings over the years translate into a retirement income that you can rely on for the rest of your life – whatever your lifestyle and aspirations.

Considering market volatility when you’re retired

Since 2015, Pension Freedoms have given retirees more choice. You can now access Defined Contribution pensions in several ways.

This includes drawdown, where you can make withdrawals when it suits you and the remaining amount stays invested. Your pension remains exposed to the market thereby giving your savings a chance to grow further while you’re retired. While this flexibility has proven a popular option among retirees, it also means you need to consider potential market volatility while in retirement.

The recent market activity has highlighted how volatility could affect retirement plans. If you intend to remain invested throughout retirement, it’s important to understand the impact and how you should manage short-term volatility. Again, this is an area we can help you with. It’s a step that can give you confidence as you head into retirement.

If you’d like to discuss your retirement plans in light of the current situation and what it means for your future, please contact us on 0117 3320230 or email hello@bluewealth.co.uk.

Please note: The above is offered only for general informational and educational purposes. It is not offered as and does not constitute financial advice. You should not act or rely on any information contained in this comment without first seeking advice from a professional.

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation which are subject to change in the future,

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Blue Financial Group Ltd (referred to as ‘we’ or ‘us’) takes the privacy and security of your personal information seriously. This policy sets out the basis on which any personal data we collect from you or you provide to us, will be processed. Please ensure you understand our policy and practices in relation to holding your personal data and how we process it.
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Under the Data Protection Act and General Data Protection Regulation individuals have a Right to Erasure (‘right to be forgotten’) which can be applied to personal data, in specific circumstances, and is a right that you may be able to exercise for the data that we hold for you. However, we can refuse to comply with a request for erasure where the personal data is being processed to comply with a legal obligation. Under FCA regulation we have a mandatory requirement to retain your data for specified periods (and for some products, such as occupational pension transfers, we are required to retain this data indefinitely) which may impact your Right to Erasure.
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We also have procedures in place to deal with any suspected data security breach. We will notify you and any applicable regulator of a suspected data security breach where we are legally required to do so.
Unfortunately, the transmission of information via the internet is not completely secure. Although we will do our best to protect your personal data, we cannot guarantee the security of your data transmitted to the Website; any transmission is at your own risk. Once we have received your information, we will use strict procedures and security features to try to prevent unauthorised access.
Keeping your personal data up to date
If your personal details change you may update them by accessing this data through the wealth platform portal, or by contacting us using the contact details below. If you have any questions about how we use data collected which relates to you, please contact us via phone or email.
We will endeavour to update your personal data within seven working days of any new or updated personal data being provided to us, in order to ensure that the personal data We hold about you is as accurate and up to date as possible.
How long we keep your personal data
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Where we store your personal data
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If you would like further information please contact us or the Compliance Director at Best Practice IFA Group Limited, of which we are an Appointed Representative (see ‘Contact’ below).

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Under the General Data Protection Regulation you have a number of important rights free of charge. In summary, those include rights to:
• Access to your personal data and to certain other supplementary information that this policy is already designed to address
• Require us to correct any mistakes in your information which we hold
• Require the erasure of personal data concerning you in certain situations
• Receive the personal data concerning you which you have provided to us, in a structured, commonly used and machine-readable format and have the right to transmit those data to a third party in certain situations
• Object at any time to processing of personal data concerning you for direct marketing
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For further information on each of those rights, including the circumstances in which they apply, see the Guidance from the UK Information Commissioner’s Office (ICO) on individuals rights under the General Data Protection Regulation

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We have that we or our Compliance Director can resolve any query or concern you raise about our use of your information. The General Data Protection Regulation also gives you right to lodge a complaint with a supervisory authority, in particular the European Union (or European Economic Area) state where you work, normally live or where any alleged infringement of data protection laws occurred. The supervisory authority in the UK is the Information Commissioner who may be contacted at https://ico.org.uk/concerns/ or telephone 0303 1231113.

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CONTACT

All questions, comments and requests regarding this Privacy and Cookies Policy should be addressed to Robert Bowers rob.bowers@bluewealth.co.uk or write to us at 3 Westbury Mews, Westbury-on-Trym, Bristol, BS9 3QA. Alternatively, please contact our Compliance Director at Best Practice IFA Group Ltd, Broadlands Business Campus, Langhurstwood Road, Horsham, West Sussex, RH12 4QP. Tel 01403 334455 or via email at info@bestpractice.co.uk