Thinking Ahead

August, 2020

How our retirement plans may change in response to the coronavirus pandemic

The coronavirus (COVID-19) pandemic has touched virtually every part of our lives and is having a widespread impact across all aspects of financial life, including retirement plans.

A a result, a significant number of people aged over 50 and in work are potentially considering delaying retirement (15%) by an average of three years, or will continue working indefinitely on a full or part-time basis (26%), as a direct result of the COVID-19 pandemic, according to new research. The findings also suggest that people,particularly those who have been furloughed or seen a pay decrease, would benefit from a financial review to assess their options before changing their plans.

DELAY RETIREMENT                                                                                                                                                                                                                               

Data from the Office for National Statistics currently shows the number of workers aged 65 years is at a record high of 1.42 million. However,if people change their retirement plans in response to the pandemic, this could increase considerably. While, on average, those who plan to delay their retirement expect to spend an additional three years in work, 10% admit they could delay their plans by five years or more. These figures are significantly higher for the 26% of over-50s workers who have been furloughed or seen a pay decrease as a result of the pandemic. 19% of these workers will delay, and 38% expect to work indefinitely.

FUTURE PLANS                                                                                                                                                                                                                                             

Some retirees nearing retirement age might need to be flexible with their plans for the future. It’s uncertain just how long it will take for life to return to normal, and while some people may still be able to retire right on schedule amid the COVID-19 crisis, other may need to either postpone retirement or consider retiring early. As a result, the impact of COVID-19 on stock market performance may also be leading some retirees and those close to retirement to question their investment strategy, but what’s the right approach? Understandably, the impulse to react- and to protect what we have- is strong.

REGULAR REVISION                                                                                                                                                                                                                                     

Retirement planning and financial planning, in general, are not ‘one-and-done’ exercises. It’s much better to think of them as fluid and as requiring regular revision. Attempting to time the market and avoid volatility by making dramatic changes to your portfolio can cause harm to your long-term investment results. With many areas of the global economy coming to an abrupt halt, markets have see-sawed between gains and declines as investors weigh the potential impact of massive stimulus initiatives by governments and central banks.

ECONOMIC UNCERTAINTY                                                                                                                                                                                                                         

The barrage of news in unrelenting. On a daily basis, we hear about more COVID-19 cases, job losses , economic concerns and oil price shocks, to mention just a few. But long-term investing is ultimately about avoiding selling out of the market and during periods of economic uncertainty an crystallising losses. Staying invested means you’ll be able to benefit from any potential recovery, and it helps to remember that volatility is actually the norm for your stocks markets. To give yourself the best chance of achieving your retirement investment goals, the right mix of asses classes is essential. An effective strategic asset allocation is one that takes enough risk to give your portfolio the potential to grow, bu not so much that you feel uncomfortable- and therefore more likely to withdraw funds at the wrong moment.

BETTER OPTION                                                                                                                                                                                                                                           

Whether you decide to postpone retirement or retire early depends on your situation. If you still have a job and your savings have been impacted over the last few months, delaying retirement to give yourself more time to prepare may be a better option. On the other hand, if you lose your job and don’t know when you’ll be able to find another one, you might choose to simply retire earlier than you planned. If you have plenty of savings set aside, you may be able to enjoy your retirement comfortably. Otherwise, you might choose to go back to work in a few years when jobs aren’t so scarce to build a stronger retirement fund.

MAKING THE BEST DECISION FOR YOUR SITUATION.                                                                                                                                                                   

Whatever option your choose.make sure you’ve thought about the advantages and disadvantages so you know you’re making the best informed decision for your situation. For further information or to discuss your situation, we’re here to help you.


[1] Opinium Research for Legal & General Retail
Retirement ran a series of online interviews among a
nationally representative panel of 2,004 over-50s from
15–18 May 2020.
(2) Office for the National Statistics,Labour Market overview, UK: May 2020

Information is based on our current understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from, taxation are subject to change. Tax treatment is based on individual circumstances and may be subject to change in the future. Although endeavours have been made to provide accurate and timely information, we cannot guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No individual or company should act upon such information without receiving appropriate professional advice after a thorough review of their particular situation. We cannot accept responsibility for any loss as a result of acts or omissions.



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