By now, you will likely have seen news reports about the impacts of the coronavirus crisis on global stock markets. Although the impacts of the virus and how governments around the world are seeking to control its spread are unprecedented, the same cannot be said for the impacts on people’s investments. Markets do fall from time to time and with varying levels of severity, but history shows that they then go on to recover.
Now, more than ever, it is important to remember that your pension is designed specifically to invest your savings for the long term. Here are a few important things to consider:
If you pay into your pension regularly: If you save money into your pension regularly, not only are you creating a good discipline that will reward you in future, you are also able to cushion these fluctuations. When markets are falling and you continue to pay in, the buying power of your regular contributions are greater because the cost of buying the underlying investments has reduced. This means that, when the investment markets do begin to recover, you will have purchased a greater level of underlying investments than you otherwise would have and, as the value of these investments increases, so will the value of your pension savings.
Younger savers: If you are some way off of retiring, there is plenty of time to see this crisis through and to benefit from years of investment growth to come in the future so long as you continue to pay in. Remember, now is a time when you can invest your money to buy extra assets while they are cheaper, giving you opportunity to benefit from their growth when markets return to normal. Making changes to your investments at times like this can ‘lock in’ losses that otherwise would have recovered. This can have serious implications on the value of your pension over the longer term.
Mature savers: If you are nearer to your retirement, it is worth taking some time to familiarise yourself with your pension – it’s value, investments and your contributions – and not to make any rash decisions (if you need to make any at all). If you were planning to take your pension in the near future, you should take extra care. How to take your pension is an important decision, so be sure to use free services like the Pension Advisory Service, who can offer you guidance. Alternatively, for recommendation and advice specific to your circumstances, you should seek the advice of a Financial Planner or Professional Financial Adviser. To speak to an adviser contact us on 01224 900879 or 01358 268166.