Putting minds at ease about pensions and recent ‘crisis’

There are plenty of scary headlines doing the rounds about pensions and markets right now, leading to a lot of nervous questions from worried investors.

Here’s what we’ve been saying to our clients and we hope it puts your mind at ease too.

A question that has come up a lot is: “Is my pension safe?”

We’ve seen numerous news stories focusing on a potential “crisis” in pension funds.

That’s because a dramatic rise in the yields of UK Government bonds, known as gilts, put pressure on final salary schemes due to concerns over liquidity.

But it’s important to note that’s only one part of the pensions market.

Although there’s still around £2 trillion invested in defined benefit (DB) schemes, ones that pay a fixed amount based on your final salary as an employee, they are a declining part of the pensions landscape.

For those paying into defined contribution (DC) schemes, the rise in gilt yields was less of an issue.

And even if you’re in a DB scheme, it’s still unlikely your individual pension fund is at risk.

The Pensions Regulator has also sought to reassure scheme members that DB funds are “not at risk of collapse”.

The important things to remember are your goals.

With a robust strategy in place, you can focus on your end-goal – whether that’s relaxing in retirement, moving abroad or leaving a legacy for family members – and not on which way the market is going.

The second thing to remember is that with the type of portfolios we create at AAB Wealth, uncertainty is factored in – even sizeable falls in the market from the very start.

Imagine a skyscraper built in an area prone to natural earthquakes or hurricanes.

The foundations are designed with that environment in mind – invisible to all but the architects that designed them.

And even if the “big one” never comes, the building’s tenants can have peace of mind that their four walls are resilient to whatever comes along.

In the same way, we know that when the markets fall, our portfolios are ready. The situation may be uncomfortable for a time, but it’s not unusual.

Our main message to clients is “talk to us”.

We’re always available to chat and we promise them never to shy away from tough questions.

We know that when the markets fall, our portfolios are ready

GOLDEN GREAT: San Francisco was built with the threat of huge earthquakes in mind. AAB pension pots are put together with the same resilience.