Retirement Planning During A Pandemic – What You Should Be Thinking About?

September 07 2020 | Category: Latest Trends, Money advice

At the moment, Covid-19 still has a lot of things up in the air. And while the immediate focus is on the continued loss of life and trying to control the virus as it slows, but shows no sign of stopping yet – we have been trying to look to the future. In particular, we’ve been looking at how Covid might impact you in the future, like potentially changing our plans for retirement. The pandemic has done a lot to change things, and may have accelerated some things for you. For example, you may have:

  • Enjoyed being at home, and are now considering retiring earlier than planned – but don’t know if you have enough put aside to fund it.
  • Decided that you need to keep working for longer, because the crisis has reduced your pension pot.
  • Recognised that working from home, or working flexible hours, could offer you a way to stay at work for longer, without the stress of commuting.
  • Realised that you don’t know how the pandemic has affected your pension pot, and now you need help understanding what you can expect in retirement, and if you need to make any changes.

If any of these sound familiar, then it may be time to take a closer look at your retirement plans, seek advice, and potentially make some changes.

How Has Covid Changed Retirement Planning?

In the past, retirement is something you did once you hit 65. You stopped working, and started living off your pension pot quite happily, spending your time playing golf or lounging on the beach. For many years now that idea has been nothing but a dream – with most of the population working much longer than age 65.

Since Covid-19 hit the scene, the world of work has changed dramatically – and the whole concept of ‘retirement’ with it. With a lot of people getting used to working at home, without the stress of exhausting commutes and early mornings, many people are reconsidering their retirement age, providing they could continue work in this fashion. Alongside that, the value of many pension pots have probably fallen and returns are low, so the idea of working part time to supplement a pension has moved from being an attractive idea to almost essential for some.

Will Covid Impact My Pension?

There is no easy answer to this, as every pension pot is different, and different investments are affected in different ways. The positive thing is that if you’re under 55, there isn’t much need to worry. Pensions are long term investments, and the likelihood is that by the time you reach retirement, things will have evened out again. However, if you are over 55 and considering accessing your pension, then there may be some things you need to take into account.

The reality is that future pension returns and income will be affected by the pandemic in some way. All pensions schemes rely on investments of one form or another to produce returns and pay income. While the pricing mechanism of the investments is affected by many factors (like investor sentiment, sector specific factors and the relative value of one investment to another), longer-term growth depends on the continued profitability of companies, and the return of those profits to shareholders. Covid has caused a blip in all of this, creating a knock-on effect in the pensions market.

We’ve gone into more detail about how Covid might impact the pensions market, so if you want to find out more, click here and read the full blog.

What Do I Need For A Reasonable Retirement Income?

The general rule of thumb for most people is that they need a return of %5 for their retirement income. However, we’re now entering a period of lower returns and lower inflation, which means that this level of income might not be achievable – or needed. To give you some context – a man retiring at the age of 65 in good health right now would get an average rate of around 4.6% annuity, and 3.8% for one that rises in line with inflation. But what you need will differ depending on your needs and lifestyle, so we recommend speaking to an expert to create a tailored retirement plan with you.

At Chilvester Financial, we are always on hand to help and give advice around pensions and retirement planning. The pandemic has a lot of people worried about the future, and we are more than happy to help guide you through this, help you understand what you need, and put new financial plans in place to ensure you don’t suffer in the future because of Covid-19. If you would like to find out more, just get in touch with the team today, and we would be happy to help.