Global markets fall after Moderna Omicron warning: How could this affect those about to retire?

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December 02, 2021 - Matt Hughes

Global markets fall after Moderna Omicron warning: How could this affect those about to retire?

Many people who are close to their chosen retirement date are now concerned by the latest stock market volatility.

The discovery of the new Covid19 variant Omicron has made international news, and stock markets around the world have sharply fallen. Stocks fell further after the CEO of Moderna, Stephane Bancel, cast doubts on the effectiveness of vaccines against the new variant, warning that there would be a “material drop” in vaccine efficacy.

Understandably, many of those who are close to retirement are worried about how the current stock market volatility will impact their pension savings, investment portfolios and overall retirement plans. This adds to the pressure many were already feeling about inflation, with the UK seeing a noticeable increase in the cost of fuel and food in recent months.

What is the impact on my pension saving?

The good news is that for many people who have chosen pensions as their primary way to save for retirement, there is likely to be little impact. Many pension plans provide a ‘lifestyling’ option and if this is something you have opted into it, it means the closer you get to your chosen retirement age, your pension investment portfolio starts to de-risk. Money is moved out of higher risk investment funds and moved into a lower risk portfolio, and by the time you retire some of this money may even be held in bonds and cash. If you have older style pension plans, but you have been working with a financial adviser, then this will have been addressed and corrected when they reviewed your pension portfolio.

Money held in investment funds will have experienced volatility, and by how much will depend on how the money has been invested. As a rule, money held in equities should be considered as a long-term strategy, with the aim of not touching the funds for at least five years. It can be difficult to see the value of your investments fall, but if they are invested in line with your attitude towards taking investment risk then this should all be within your comfort level, and in time you should see a recovery in value.

More good news is that government pensions are unaffected. Depending on when you were born determines whether you are eligible for the State Pension or The New State Pension. How much income you receive will depend on how many eligible years of contributions you have made. You can find your eligibility and expected income by visiting the you.gov website. You will need your national insurance number to trace your account.

Inflation is a very real concern for anyone entering retirement. Last month the government retracted on its promise to those in receipt of state pension. The ‘triple lock’ promise was a formula which was introduced by the Conservative/Liberal Democrat coalition government in 2010 to guarantee pensioners’ incomes rise by either: September’s rate of inflation, earnings growth, or a guaranteed minimum of 2.5% – whichever is larger. In reality, if inflation is a concern as you seek to enter retirement, then you should speak to a financial adviser about alternative options. Phasing into retirement is an option, this means you start to draw an income whilst continuing to work on a reduced hour basis. This can cushion a shortfall in savings whilst allowing other money to continue to be invested.

Finding the right moment to retire

For many people, it has been a difficult two years as Covid has challenged all aspects of life. We have seen a noticeable increase in the number of people keen to bring forward their retirement date because of job frustration or health fears. There has been a movement to push forward on key financial milestones, to clear mortgages and increase savings, driving closer to the financial freedom of retirement. This has not been without challenges.

The new variant means we may enter a further period of economic uncertainty. It is important to remember that whilst there are going to be economic impacts, they should be limited, and this is because the UK Government and the US Government will try to avoid any further lockdowns.

There is no perfect time or moment for any of life’s major decisions, and this includes retirement. Working with a good independent financial adviser will help you to make informed decisions and provide you with the information you need to make choices. If you are considering retirement in the coming years or approaching your selected retirement date, then getting advice now will ensure you make the right decisions moving forward.

Find out more

To find out more about your pre-retirement options, or to get independent advice on how to turn your pension savings into an income, then our team of advisers at Furnley House can help. Call Furnley House on 0116 269 6311 or email info@furnleyhouse.co.uk.

 

Past performance is not a reliable indicator of future performance.

The value of an investment and the income from it could go down as well as up. The return at the end of the investment period is not guaranteed and you may get back less than you originally invested.