Should you delay your retirement because of coronavirus?

Retirement planning has taken on a new dimension during the coronavirus pandemic. You or members of your family may be asking whether a delayed retirement is the most sensible option for someone over 50.

The latest Schroders UK Financial Adviser Survey found that half of advisers have seen clients defer their retirement as a result of income losses triggered by COVID-19, with capital and investment income losses and impact on retirement plans the top three concerns. Many people have also expressed concern over the impact on their pension.

According to research from Legal & General Retail Retirement, up to 1.5 million workers aged over 50 could delay their retirement by an average of three years due to the impact of the pandemic, while 26% anticipate having to keep working on a full-time or part-time basis indefinitely. The figures are significantly higher for workers over 50 who have been furloughed or experienced a pay decrease since lockdown began, with 38% expecting to work indefinitely.

Exploring your options

While this is obviously a harsh blow to those at such a crucial stage of their retirement planning, it’s essential to explore all options and work out the true impact on your retirement plans before making any significant decisions.

First, we recommend drawing a clear picture of your total savings to clarify where you stand. This should include your pension pot income, all investments and any other sources of income. In the short to medium term, many households have already saved – and will continue to save – a significant amount of capital during lockdown, with commuting and other costs no longer eating into their earnings as they once did. Factor these figures into your financial picture.

In addition, you should think about the products and savings vehicles that could prove most rewarding in the current climate. As people seek out more financial certainty in a volatile market, options such as annuities and equity release may become more appealing. Capital preservation and more active investing have also become more of a priority for many.

The flexibility of drawdown solutions for retirement income is likely to make it more popular now than ever. Consider both the short term and long term issues with a view to balancing immediate drawdown needs with your longer-term retirement picture and financial longevity.

Investments and equities

One of the reasons cited by those choosing to delay retirement is giving their investments time to recover from coronavirus-induced market fluctuations. The measure of how much this might impact you individually comes down to how much capacity for loss and diversification is built into your portfolio, and whether you’ve created a risk-appropriate investment structure. All of the above can protect your finances against natural drops in portfolio value.

Fidelity’s Investor Survey shows that 71% of UK investors who plan to retire in the next five years believe they will have to rethink their plans because of the impact of COVID-19. Fidelity’s research also shows that 48% of all pension investors have seen a fall in the value of their retirement savings, while 51% said that their savings won’t meet their retirement needs.

If your portfolio has lost value, this doesn’t mean you will necessarily need to compromise the quality of your retirement or tone down your goals. Instead, it’s important to focus on building additional savings and analysing your portfolio to position it for higher returns.

This may mean reconsidering both the individual components and overall picture, including how much of your finances are invested in equities and how hard the individual elements of your portfolio will need to work to generate returns – for example, bonds versus equities.

Market recovery

While it might not be as reassuring as a concrete solution, it can also be worth biding your time to see how the markets recover. The equity landscape may look very different in a year or two and delaying your retirement means more time to earn and save whilst adjusting your portfolio to ensure optimum safety and security against future losses.

Many people naturally adopt a more cautious approach to risk the closer they get to retirement, but now may be a good time to reassess your risk tolerance, asset mix and expectations in line with your retirement goals and the current economic climate. This might mean reconsidering your equity weighting and asking other key questions where the guidance of an expert financial adviser will make a difference.

To find out how our wealth management team can support your later life planning, please get in touch using our enquiry form.

 

The information contained within this communication does not constitute financial advice and is provided for general information purposes only. BKL Wealth Management shall not be liable for any technical, editorial, typographical or other errors or omissions within the content of this communication.

All wealth management advice will be provided by our affiliated FCA registered company BKL Wealth Management Limited.

BKL Wealth Management Limited is an appointed representative of Vintage Wealth Management Limited which is authorised and regulated by the Financial Conduct Authority. FCA number 593380.

NICOLA HALL

BILSHAN MENSAH

Sam Inkersole

In 2022, Sam won the Taxation’s Rising Star award at the Taxation Awards in and was named in the Accountancy Age 35 Under 35.

Jon Wedge

While Jon’s client work focuses on the financial services sector, he also oversees the firm’s assurance service, as well as supporting the trainees following in his footsteps.

ELANA DIMMER

Elana joined us in 2017 as an ACA trainee, after graduating from Durham University where she had studied languages. She is now a manager in our assurance team.

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