Communicate your concerns
Scary headlines over pensions can cause consternation, but Alastair Moore advises you consult an expert with your worries
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 – we hope it puts your mind at ease too...
IS MY PENSION SAFE?
A recent question that has come up frequently is “Is my pension safe?” We’ve seen many 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 liquidity concerns. But it’s important to note that that’s only one part of the pensions market.
There’s still about £2 trillion invested in defined benefit (DB) schemes – ones that pay a fixed amount based on your final salary – but they are a declining part of the pensions landscape.
For those paying into defined contribution (DC) schemes, the rise in gilt yields has been less of an issue.
But, even if you’re in a DB scheme, it’s still unlikely your individual pension fund is at risk. And the Pensions Regulator has also sought to reassure scheme members that DB funds are “not at risk of collapse”.
SHOULD I MAKE CHANGES TO MY PORTFOLIO?
The important thing to remember here is to focus on 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 – not on which way the market is going.
The second thing to remember is that with the portfolios we create at AAB Wealth, uncertainty is factored in – even sizeable falls in the market – from the very beginning.
Imagine a skyscraper that’s 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.
VALUE OF GOOD FINANCIAL ADVICE
So, our main message is – talk to us. We’re always available to chat, and we promise not to shy away from the tough questions.
If you, or someone you know, has an adviser who isn’t getting in touch, or isn’t as open about discussing these issues, we invite you to get in touch. Often, a second opinion really helps. Alastair Moore is a chartered financial planner at AAB Wealth.