Download Is Stock Market Volatility Bad For Your Pension

Is Stock Market Volatility Bad for
Your Pension?
FUTURE PROOF: Global equity markets have lost significant value since
the beginning of the year. For those investing for retirement will this
mean bad news for their pension pot?
Emma Wall 4 February, 2016 | 11:44AM
Emma Wall: 2016 has so far been a year of significant stock market
volatility. And while longer term investors may see this as a great
opportunity to pick up bargain stocks, those approaching retirement can
be forgiven for being slightly less sanguine. So what can retirees do to
make sure they are not negatively impacted by this volatility?
Well, the first thing is don't panic. The new rules which came into place
last April mean that you do not have to crystallise losses on retirement.
You do not have to buy an annuity. You can of course just leave those
pension savings in your pension savings plan and ride out the market
volatility.
If you need funds immediately than have a look at your cash assets
before you automatically go to your pension where taking money out will
of course crystallise losses and you won't be able to make those gains
back up again.
Secondly have a look at what you are invested in. Some people are
invested in what's known as lifestyle pensions through their workplace
pension scheme and quite often these swap out of stocks and into bonds
in the run up to someone's retirement. So you may not be as exposed to
these riskier, more volatile areas, as you thought.
If you are about five years from retirement, there are some things to do
now to make sure that when you come to retirement you are not as
negatively affected as you might be. One of the things that's coming into
place, and the changes that are coming into place, over the next couple of
months in the U.K. are that those who are high rate tax payers will see
their pension relief be reduced. This means that if you don’t take
advantage of that pension relief now you may lose it forever. So if you
can make sure you are topping up your pension as much as possible in
the next couple of months.
Finally, it sounds simple, but of course you don’t have extra income
coming in retirement which means you should have a look at your
spending habits. Maybe don’t make any big purchases while the market is
so volatile and try and really reduce your outgoings.