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Coronavirus – how it could affect your retirement income


Why you should reconsider your pension with- drawal strategy during periods of market volatility


Stock market volatility can be unsettling for investors of all ages, however much they have invested and whatever their objectives may be.


However, the market fluctuations triggered by the corona- virus outbreak and its impact on the global economy have particular implications for investors taking income from their retirement pots.


There are two related concepts – or risks – at work in retire- ment investing.


Pound-cost ravaging


‘Pound-cost averaging’ is the result of, when building up your pension pot, buying smaller amount of stocks at different times, perhaps regularly; rather than risking making a big investment only to find the market falls.


But when you’re withdrawing retirement income in a declin- ing market, because the unit price of your investments falls, you have to cash in more of your pot to maintain the same level of income as before. This is known as ‘pound-cost rav- aging’.


Retirement Planning, Investment Planning, Mortgage & Protection & Inheritance Tax Planning


Tel: 01454 618700 Mobile: 07864 942 720 Email: george.price@sjpp.co.uk Web: www.pricefp.co.uk


Sequencing risk


An associated peril is ‘sequencing risk’: this is the risk that a market downturn will happen at a particularly bad time in your drawdown cycle.


In a period of prolonged volatility, you may end up taking an unsustainably high amount of cash out of a pot that’s steadily dwindling.


When this downturn coincides with the beginning of your re- tirement, it’s when you’re most vulnerable because you are no longer working and you have all your retirement years yet to fund.


Mitigating their effects


The good news, however, is there are several ways to help minimise the impacts of these risks.


They include having a cash fund to draw down from in times of volatility, so that equity investments are allowed to fluctu- ate and potentially weather the storm. While this provides stability, however, any money held in cash will lose its value in real terms due to inflation.


Another option is to take only ‘natural income’ – such as divi- dends – rather than drawing from the capital. This will mean that what you have to spend is variable and will be less when markets are depressed.


You need to be flexible. You can have several income strat- egies. The art of managing market downturns in retirement is knowing exactly what to do and when – and that’s where financial advisers really earn their stripes.


If you’re worried about the effects of market volatility on your retirement income, or you want to understand more about making withdrawals during this period of uncertainty, just ask a financial adviser.


To receive a complimentary guide covering wealth manage- ment, retirement planning or Inheritance Tax planning, con- tact George Price at Price Financial Planning Ltd on 07864 942 720 or email george.price@sjp.co.uk.


“Providing professional and personal financial advice” Retirement Planning, Investment Planning,


Mortgage & Protection & Inheritance Tax Planning


Tel: 01454 618700 Mobile: 07864 942 720 Email: george.price@sjpp.co.uk Web: www.pricefp.co.uk


PRICE FINANCIAL PLANNING LTD Partner Practice of St. James’s Place Wealth Management George Price DipPFS CertCII(MP&FS), Director The Partner Practice is an Appointed Representative of and represents only St. James’s Place Wealth Management plc (which is authorised and regulated by the Financial Conduct Authority) for the purpose of advising solely on the group’s wealth management products and services, more details of which are set out on the group’s website www.sjp.co.uk/products. The ‘St. James’s Place Partnership’ and the titles ‘Partner’ and ‘Partner Practice’ are marketing terms used to describe St. James’s Place representatives.


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