Recent volatility in the market could have an impact on your pension
Bond yields are up, some parts of the stock market are down – making sense of how this affects your pension is hardFinancial markets have been rocked in recent weeks by a sell-off of government debt, which has led to people worrying about their pensions.
At the moment, returns on cash savings accounts are high with some accounts offering rates as high as 8 per cent. Meanwhile, a ten year UK gilt is offering 4.35 per cent. O’Connor said: “At beginning of someone’s retirement journey, pension pots are likely to be 100 per cent invested in global equities. As they get older it’s 80/20 in equities and bonds, the more traditional safe haven assets. As they get even closer to retirement, the portfolio is more likely to be 60/40.”
So if you are about to retire and your pension funds have gone done, it would be sensible to try and delay drawing down on your pension money, or to use other savings first. .Tom Selby, pensions expert at AJ Bell, said: “For those intending to take an income through drawdown, they will have taken a huge hit to their fund value because their investment choices don’t match their retirement income plan.
And when gilt prices go down, annuity rates go up which means anyone looking to secure one could be in luck. For example, if your pension portfolio is made up of 100 per cent bonds and one day it has £200 with a 5 per cent return, if you are living off the interest you will get £10 a year.
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