It is only natural to be concerned over Brexit and how it might affect your personal financial objectives; your future; the value of your investments; the age you are likely to be able to stop working and what your income might be. It is not easy to know where we stand or how to react when political commentators and financial experts offer so many conflicting views.
The general consensus for those with a pension is to stay calm and avoid taking unnecessary risks. Changes are going to take time to implement and markets will continue to fluctuate. Overall big pension funds have been largely unaffected as falls in share prices have been set-off by gains from bonds and sterling¹.
This does not mean one should relax and do nothing, for those in certain situations it may be worthwhile reviewing their position. For example, looking at possible changes in the Autumn budget statement; higher rate tax reliefs, tax-free cash rules and salary sacrifice could potentially be on the agenda for cuts. Anyone paying into a pension or considering taking benefits should review their situation before then with a financial adviser. Especially if you are over 55 and considering taking pension benefits, or a higher rate taxpayer.
Pension investments should contain a mix of asset class which are uncorrelated and so should behave differently in volatile market conditions. It is important to know your investments are diversified, bearing in mind your attitude to risk. Annuity rates have fallen again for those taking out an annuity today. Those over 55 could delay purchasing an annuity and leave their money invested. Pension freedoms suggest less people will buy an annuity choosing instead to opt for the higher risk of drawdown. Whilst it is less secure, drawdown has better death benefits and much more flexibility in taking your money. Anyone with concerns regarding their pension and investments should contact their financial adviser for peace of mind, as well as a full re-assessment of their plans for the future.
Scott Fyffe is a financial adviser specialising in pensions. He is an associate partner of Glasgow based Chartered Financial Planners Henderson Stone & Co Ltd. He is head of the Dundee office on West Victoria Dock Road, Dundee.