Chadwick Financial Management / Independent Financial Advisers
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Little has changed in terms of legislative and policy decisions since the EU referendum on 23 June. But we are all aware that the Leave vote will have a long-term financial impact – not least on what Brexit means for your pension.
Economic uncertainty is not a good thing for investors, it makes the market more cautious. In this regard, pensions are impacted, because policyholders invest the money you contribute in order to make it work harder.
In fact, if you’re nearing retirement age, you should be looking to take proactive steps to protect your nest egg.
To help you get started, here are our top tips for Brexit-proofing your pension.
Annuities are financial products that convert retirement contributions into a guaranteed income, which are paid out over your lifetime once you’ve enacted the policy.
However, the majority of annuities available on the market are not currently competitive, as they are based on gilt government bonds, which are not producing good yields due to low government interest rates.
If possible, try to avoid drawing down an annuity in the foreseeable future, as there are too many economic unknowns at present to accurately determine how the annuities market will be affected.
Many people working towards retirement look to savings accounts to supplement their pension pot.
However, while mortgage holders have benefitted from a recent dip in interest rates, it is bad news for savers, who will not get much return on their investment – especially as Brexit means interest rates are unlikely to rise for some time.
Although some banks are not passing on interest rate declines to customers in order to remain competitive, long-term low rates continue to cause pain for savers.
So rather than relying on savings to fall back on, you should look to maximise the money in your pension pot ahead of retirement.
The uncertainty of leaving the European Union is going to lead to problems and volatility in the stock market, as we have already mentioned, so it’s more important than ever to pay attention to what your pension provider is investing in.
Taking an active interest in your investments is one way to better understand how Brexit is impacting certain industries, and what that means for your pension pot. It also affords you greater understanding of how your pension is growing, so you can choose to opt for a more aggressive or conservative pension plan in response.
Although we’ve talked about the challenges of savings accounts, it is important to have ready access to cash, in the event of an emergency or larger purchase.
It’s important to allow a small budget for contingencies during retirement, as you don’t have an income coming in anymore to recoup the costs of an unexpected bill.
Protecting your pension pot from the impact of Brexit means having a firm grasp on exactly what economic changes will mean for your nest egg.
The clearest way to get advice and find the best deal for your individual needs is to enlist the support of a financial advisor. A financial adviser will be able to help you find competitive rates, at the same time as managing the risk associated with your pension fund.
If you need help with managing your financial risks, our professional team can help you to develop the pension right for you.
The value of investments can go down as well as up and you may not get back the amount invested.