We have just gone through the biggest economic downturn in 300 years. Despite the government’s efforts to protect businesses and jobs, the UK economy has lost £billions.
Many of us will have seen the effects in our pension portfolios. It means that year’s statement may be a little disappointing, with your pension pot showing little growth, if it has not actually fallen.
But there could be some good news. According to Barclays, the UK economy could be set not just to recover, but to grow at its fastest rate since 1948.
This sounds exciting, but does it mean your pension will recover with it?
Has your pension suffered?
Many pensions will have weathered the storms of the last few months, thanks to the skills of pension fund managers.
Whether it is your workplace pension or a personal pension, your pension contributions are invested on your behalf. Pension fund managers use a number of techniques to spread the risks, avoid high risk holdings and ensure that your funds are invested for steady growth and security. Losses should have been minimised – but your pension may still have suffered some setbacks.
Even the most far-sighted investment manager could not have foreseen the effects of lockdown. Fortunately, although the falls in the markets this time last year were frightening, good management and shrewd investments should have protected you from the worst of the losses and already be taking advantage of the recovery in the markets.
The stockmarkets are still volatile, but they have come back up a long way from the depths they fell to this time last year. Your pension should remain the core of your retirement planning. But the important question is – what will happen now?
Speak to us today
If you have worries about any of your finances in the wake of Covid, contact us for some free initial help.
The recovery could boost your pension pot
The recovery provides reasons for optimism as businesses get busier, the stock market rises and the value of the investments that make up your pension pot rise with it. But it might not be simply going back to business as usual. The world has changed since the pandemic struck. Some sectors, such as high street retail and travel have been hit worse than others.
On the other hand, there will be some sectors and some businesses that are poised to benefit as the recovery begins to gather speed. eCommerce and logistics businesses are already thriving.
It may be time to look again at how your pension plans are reflecting the opportunities.
Time for a pension review
At Continuum we are ready to put our expertise to work for you to get your pension back on track.
We can start with a full pension review of your existing arrangements. We can prepare a projection, showing the kind of retirement income you might be able expect, and whether Covid has caused a shortfall. We can then show you what changes you could make to take advantage of the recovery.
This could include taking out a personal pension if you do not already have one – or boosting your existing contributions. Remember, your pension is a powerful way to invest because of the tax benefits it enjoys. You can invest your full salary or up to £40,000 a year, whichever is lower– but if you are a higher rate taxpayer allowing for 40% tax relief, this could be worth £56,000 even before your fund manager gets to work.
If your pension contributions are already at your allowance level we might also suggest setting up some additional investments. These could focus on the sectors set to make the most of the recovery and work alongside your pension. They could also hold out the prospect of tax-free income when retirement time comes.
At Continuum we can help find the ways to make your pension investment mount up faster, and the money in it to work harder for you.
The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable retirement strategy, you should seek independent financial advice before embarking on any course of action.
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. Pension income could also be affected by interest rates at the time benefits are taken.
The tax treatment of pensions in general and tax implications of pension withdrawals will be based on individual circumstances, tax legislation and regulation, which are subject to change in the future.
The value of investments can fall as well as rise and you may get back less than you invested.