Private Pensions & Brexit

Old_Possum

My PP kicks in in 18 months time. Given what is happening in the markets is it worthwhile continuing to pay into it? Or would I be better off cancelling it and just saving the money each month?

greenglide

That depends on what you intend on doing with the pension when "it kicks in".

If you intend withdrawing all the money (with its associated tax impact) or you will buy an annuity with the fund then you should already be largely in "safe" investments.

If would will be drawing down in stages or doing nothing then it will depend how much you will be drawing and when.

If using drawdown you do have other sources of income and savings to protect against times of investment falls?

molerat

When and how your pension is invested is the important question. For stability you should be considering a lower risk investment strategy the closer you come to retirement time, a stock market crash the week before retirement could be catastrophic.

Old_Possum

Thank you for that prompt reply. I was intending to claim my lump sum (as specified in my pension terms) and use the remainder of the pension as a monthly top up. However, with the markets in the turmoil that they are in. I am now wondering if I will actually get what my last pension statement forecast. I am due another annual statement in August so am now in a dither over whether to stop paying into it and just save the next 18 monthly payments to an ordinary ISA.

Old_Possum

It's with Zurich so I have no idea what they invest the money in

Old_Possum

I have never chosen to invest in high risk options, if that is what you mean.

dunstonh

I am now wondering if I will actually get what my last pension statement forecast.

They are not forecasts. They are example projections using a range of assumptions.

It's with Zurich so I have no idea what they invest the money in

You ought to unless you are paying an IFA to do it for you. For example, if you plan to buy an annuity in retirement then you should be looking to reduce your equity content of the investments in stages starting from 5-10 years before retirement.

A stockmarket crash is 20%. We had one last Autumn. There has been no crash with Brexit. Yet you worry about Brexit but no concern about the market crash last year? What if there is a crash the week before you retire? Your income/lump sum will be 20% lower. Can you afford that?

I have never chosen to invest in high risk options, if that is what you mean.

How do you know if you dont know what you are invested in? Relative to timescale, you could be invested in high risk options. i.e. a medium risk fund becomes high risk if the timescale is short.

so am now in a dither over whether to stop paying into it and just save the next 18 monthly payments to an ordinary ISA.

Pensions and ISAs share the same investment options. Put the same fund in both and you get the same return. If you mean cash ISA then that may be viable but it could also be the wrong thing to do. I saw someone recently who stopped a pension a few years ago without advice and kept another one going. They thought they kept the better one. They didnt. The one they stopped had guaranteed annuity rates and a guaranteed minimum fund value as long as they continued payments until the selected retirement age. Their decision cost them around £30,000.

You need to get this right. That means finding out what you have and how it works and making adjustments, if necessary. However, it doesnt mean you make adjustments without finding out the information first.

Old_Possum

dunstonh wrote: »

They are not forecasts. They are example projections using a range of assumptions.

Thank you for that.

dunstonh wrote: »

You ought to unless you are paying an IFA to do it for you. For example, if you plan to buy an annuity in retirement then you should be looking to reduce your equity content of the investments in stages starting from 5-10 years before retirement.

Thank you again.

dunstonh wrote: »

A stockmarket crash is 20%. We had one last Autumn. There has been no crash with Brexit

Comfort there then.

dunstonh wrote: »

Yet you worry about Brexit but no concern about the market crash last year? What if there is a crash the week before you retire? Your income/lump sum will be 20% lower. Can you afford that?

Can anyone?

dunstonh wrote: »

How do you know if you dont know what you are invested in? Relative to timescale, you could be invested in high risk options. i.e. a medium risk fund becomes high risk if the timescale is short.

Let me re-phrase that. I did not request that my money be invested in high risk investments as an option. I understand that high risk can yield high returns but can also risk more severe losses.

dunstonh wrote: »

Pensions and ISAs share the same investment options. Put the same fund in both and you get the same return. If you mean cash ISA then that may be viable but it could also be the wrong thing to do. I saw someone recently who stopped a pension a few years ago without advice and kept another one going. They thought they kept the better one. They didnt. The one they stopped had guaranteed annuity rates and a guaranteed minimum fund value as long as they continued payments until the selected retirement age. Their decision cost them around £30,000.

Again, thank you for that tip.

dunstonh wrote: »

You need to get this right. That means finding out what you have and how it works and making adjustments, if necessary. However, it doesnt mean you make adjustments without finding out the information first.

That is sound advice. Thank you.

AnotherJoe

Old_Possum wrote: »

Thank you for that prompt reply. I was intending to claim my lump sum (as specified in my pension terms) and use the remainder of the pension as a monthly top up. However, with the markets in the turmoil that they are in. I am now wondering if I will actually get what my last pension statement forecast. I am due another annual statement in August so am now in a dither over whether to stop paying into it and just save the next 18 monthly payments to an ordinary ISA.

Why on earth would you turn down the tax relief? Save £80 in your pension and get £100 (and possibly more) that you can take out in 18 months or save £80 in a ISA and get £80? Do you normally throw £20 notes away ?

You dont have to invest the money in shares or funds just because its in a pension, you can hold it as cash. Just tell the pension provider you want further contributions held in a cash fund.

As for being worried about the effect on shares that was something to consider a year or two ago when getting ready for retirement rather than panicking at every stock market hiccup (FWIW the FTSE all share is roughly where it was about a week ago, its not in the toilet as the headlines would make you think)

atush

I agree with the above, keep paying in to get the tax relief.

But you can and should look to your investments and see what they are, and can put the new money going in to something less volatile.