While the idea of a better future might give us hope, it is likely to be difficult to encourage people to think about retirement and their pensions at a time like this when immediate survival might be their priority.
But think of it another way – if hope is needed, wouldn’t another arm around the shoulder and guidance on the best path to a better future give people something to look forward to? If you have an employee thinking about retirement it might seem daunting at the moment. They might be wondering whether the retirement date they envisaged in a pre-COVID world is still an option or is an impossible goal.
So let’s look at the key challenges in front of us.
The Pensions Regulator advises us that there is a range of issues that pension trustees, employers and their advisers are facing as a result of COVID-19. They suggest focus is needed on key risks to pension savers, namely that benefits need to be paid and the risk of scams needs to be minimised. Equally, employers need to continue contributing and savers need support to make good decisions in these challenging circumstances.
Then there is the economy. Markets have recovered to a degree already – but not to the original level. We are not out of the woods yet. The FTSE 100 has always eventually climbed out of bear markets up to pre-crash highs, but – let’s face it – that can take years. You can read an interesting article about this from AJ Bell here On the other hand, we should remember dividends can still provide an income for investors, even when a recovery is slow. The old adage about ‘time in the market, not timing the market’ has never been more relevant. With a recession predicted and many unsure what questions to ask first, we thought we would do the sensible thing and speak to our personal advice team. The first thing we are told is…don’t panic.
Mark, one of our financial advisers in MyEva’s Personal Advice Team tells us that he has been asked a number of common questions recently by clients thinking about retirement, so we thought we would share some of them.
It’s fair to say that life’s rich tapestry is evidenced in a diverse client base and, while many are struggling financially, others are wondering what to do with spare cash. When we spoke with Mark, he said if you have a lump sum spare it can often make sense to drip feed this into the market and start regular contributions into Stocks and Shares ISAs or savings plans, for example. A fixed monthly investment if you can afford it – sometimes referred to as a ‘set and forget’ approach – means one less worry to tick off the list at times.
Many of us now have two or more pension pots as we have moved from job to job in our careers. Mark tells us that it is often worth looking to consolidate to potentially save on charges, if that is right for you – every penny counts! This also presents minimal risk as the funds are already invested. In other words, you are not buying or selling. However, you should only consolidate based on advice from a regulated financial adviser as many non-advised services can offer seductive marketing messages based around tracking down lost pension pots and seeing them all in one place – and this sort of approach needs to be considered against a multitude of factors a regulated adviser can help with. For example, a good adviser will be aware of the raft of different rules and regulations and the beneficial product features that may have been marketed in the past but are no longer available. Also, comparing one product and another in an industry that loves jargon can be confusing. This is where a qualified financial adviser is most helpful and, with a digital model, also affordable, accessible and able to help you from the comfort of your own sofa in a socially-distanced world.
If you are over 55, for example, and were thinking of retiring in the next 12 months, Mark may suggest looking at putting your tax-free cash into cash now. If you’re planning to take your income on a drawdown basis, it may be wise to drawdown into cash your requirements over the next two to three years now, allowing the remainder of the fund to recover giving security of income over that period. This is just an example and should in no way be taken as advice, which is specific to individual circumstances – always consult a regulated financial adviser before making any decisions.
More than ever before, having a review of your finances is needed to make sure your objectives are clear, aligned and on track. On average, those who take financial advice will see a 25% boost to their pension pot over a 10 year period. That's £35,054!*
Another arm around your shoulders at the moment (albeit metaphorically) can only help give us hope. Mark works with MyEva, our web-based digital adviser, which can provide this arm from the safe distance of your phone or laptop. It starts with a free 30-minute online chat and ends with a brighter future at best and a clear path towards one at least. Sometimes, MyEva will ask Mark or one of his human colleagues to help out, if she feels she needs another pair of eyes on your challenges and opportunities. Employers can now introduce their staff to MyEva at zero cost and this can be launched in less than 10 minutes – all that is needed is an email address….
As all the best financial advisers are client-focused, we asked for a perspective from one of Mark’s clients to illustrate this, an employee of one of our clients. We heard from Joe…..
Joe is 55, he’s worked for five different companies throughout his career. He’s now thinking about the money he’ll have in retirement. He’s always paid into a pension but has never really taken notice of it. He has a lot of paperwork in the cupboard but hasn’t really made much sense of it. Joe decides to talk to one of the advisers working with MyEva about ‘tidying up’ his pensions. He learns that ‘Pension Tidy Up’ is simply a way of combining all of his pensions into one to make it easier to administer and save him money on fees. What Joe doesn’t realise is that it isn’t always best to transfer all pensions. He discovers that he has a pension called a ‘final salary benefit’ which means that with this particular pension he’ll receive a secure income from that pension for the rest of his life. His other four pensions are ‘defined contribution’ pensions and would work well being combined into one. Joe wouldn’t have found this out had he not spoken to Mark,. Joe is really surprised to find out that rather than working till he was 67, he could actually afford to retire at age 65 which cheers him up no end.
We would like to help you give your employees a clear path to a brighter future and let us put an arm around them from a safe distance, but so close to home. Have a chat to Mark too, he is a nice bloke.
For any employer wishing to learn more about MyEva (and Mark and the rest of the team!) can help please contact firstname.lastname@example.org.
*International Longevity Centre, 2019