Alastair Moore: Putting your mind at ease about your pension
Alastair Moore, a chartered financial planner at AAB Wealth, outlines the advice the firm has been giving to its clients.
There are plenty of scary headlines doing the rounds about pensions and markets right now, leading to a lot of nervous questions from worried investors.
Is my pension safe?
A question that has come up a lot is “Is my pension safe?”
We’ve seen numerous news stories focusing on a potential ‘crisis’ in pension funds.
That’s because a dramatic rise in the yields of UK government bonds (known as gilts) put pressure on final salary schemes due to concerns over liquidity.
But it’s important to note that that’s only one part of the pensions market.
Although there’s still around £2 trillion invested in defined benefit (DB) schemes (ones that pay a fixed amount based on your final salary as an employee), they are a declining part of the pensions landscape.
For those paying into defined contribution (DC) schemes, the rise in gilt yields has been less of an issue.
And even if you’re in a DB scheme, it’s still unlikely your individual pension fund is at risk. And the Pensions Regulator has also sought to reassure scheme members that DB funds are “not at risk of collapse”.
Should I make changes to my portfolio?
The important thing to remember here is to focus on your goals.
With a robust strategy in place, you can focus on your end goal – whether that’s relaxing in retirement, moving abroad, or leaving a legacy for family members – not on which way the market is going.
The second thing to remember is that with the portfolios we create at AAB Wealth, uncertainty is factored in – even sizeable falls in the market from the very beginning.
Imagine a skyscraper that’s built in an area prone to natural earthquakes or hurricanes.
The foundations are designed with that environment in mind – invisible to all but the architects that designed them.
And even if the ‘big one’ never comes, the building’s tenants can have peace of mind that their four walls are resilient to whatever comes along.
In the same way, we know that when the markets fall, our portfolios are ready. The situation may be uncomfortable for a time, but it’s not unusual.
The value of good financial advice
So, our main message to our clients is … talk to us. We’re always available to chat and we promise not to shy away from the tough questions.
If someone you know has an adviser who isn’t getting in touch, or isn’t as open about discussing these issues, send them our details. Often, a second opinion really helps.