October 2022 - Lawsons Equity

Pension Makeover

Don’t forget, your pensions should always work for you

By the time we have been working for a decade or two, it is not uncommon to have accumulated multiple pension plans. There’s no wrong time to start thinking about pension consolidation, but you might find yourself thinking about it if you’re starting a new job or nearing retirement.

Consolidating your pensions means bringing them together into a new plan, so you can manage your retirement saving in one place. It can be a complex decision to work out whether you would be better or worse off combining your pensions, but by making the most of your pensions now, this could have a significant impact on your retirement.

Retirement savings in one place

Whenever you decide to do it, when you retire it could be easier having a single view of all of your retirement savings in one place. However, not all pension types can or should be transferred. It’s important that you obtain professional advice to compare the features and benefits of the plan(s) you are thinking of transferring.

Some alternative pension options may offer the potential for a better investment return than existing pensions – giving the opportunity to boost savings in retirement without saving any more. In addition, some people might benefit from moving their money to a pension that offers funds with less risk – which may not have been available before.

This could be particularly important as someone moves towards retirement when they might not want to take as much risk with the money they’ve saved throughout their working life.

Keeping track of the charges

If someone has several different pensions, it can be difficult to keep track of the charges they’re paying to existing pension providers. By combining pensions into a new plan, lower charges could be available – providing the opportunity to boost retirement savings further. However, it’s important fully to understand the charges on existing plans before considering consolidating pensions.

Combining pensions into one pot also reduces paperwork and makes it easier to estimate the income someone can expect to receive in retirement. However, before the decision is made to consolidate pensions, it’s essential to make sure there is no loss of benefits attributable to an existing pension.

Review your pension situation regularly

It’s important that you review your pension situation regularly. If appropriate to your particular situation, and only after receiving professional financial advice, pension consolidation could enable existing policies to be brought together in one place, ensuring they are managed correctly in line with your wider objectives.

Gone are the days of a job for life. So many of us may have several pensions accumulated over the years – some of which we may have left with former employers and forgotten about! Don’t forget, your pension can and should work for you to provide a better quality of life when you retire. Looked after correctly, it can enable you to do more in retirement – or even start your retirement early.

Market Update Monday 31st October 2022

Technology names disappoint in earnings season.

This week’s headlines were dominated by the continuation of earnings season in the US as investors digested disappointing reports from large-cap technology names. Nearly $1 trillion was wiped off the value of the largest technology companies who all cited a slowing global economy and increasing cost pressures. Google parent Alphabet fell 9.1% on Wednesday after the company announced worse-than-expected growth in its core advertising business and Facebook owner Meta dropped 5.6% on the same day as it reported a decline in third-quarter revenue. Amazon on Thursday reported a weak revenue forecast for the rest of the year, whilst Microsoft was also punished by the market as the company provided downbeat forecasts despite resilient revenue growth on the back of growing cloud services demand.

Although the US technology sector finished lower for the week at -0.62% as of 12pm London time, the broader US index still posted a positive gain of 1.45%. It was also a mixed picture for the rest of the equity markets. Europe and the UK posted stronger gains with their main indices up 3.06% and 1.52% respectively. However, in Asia, Chinese stocks sold off in the wake of President Xi Jinping securing a third term as party leader. Investors fear continuing strict policy that could hamper the growth of tech giants with very few people who can challenge Xi’s policies. The Hong Kong index finished 8.32% lower whilst the Shanghai Composite fell 4.05%.

The European Central Bank raises interest rates as expected

With much of the year also focused on monetary policy and inflation, the European Central Bank (ECB) raised rates by 0.75%, pushing its deposit rate to 1.5%, the highest level since 2009, in a bid to tackle inflation. Inflation for the eurozone hit 9.9% in September. Meanwhile, a flash reading of the composite purchasing managers’ index, a gauge of manufacturing and services activity, showed a decline to 47.1 from 48.1 for September. Readings below 50 indicate a decline in activity, and this was the biggest contraction for almost two years, raising fears that the Eurozone is likely entering a recession.

UK bond market rallies as Rishi Sunak is confirmed as UK Prime Minister

Gilt yields (which move inversely to their bond price) continued to fall as Rishi Sunak was confirmed as the UK’s prime minister on Tuesday. Gilt yields returned to levels last seen before September’s ill-received “mini” Budget announced by former Prime Minister Liz Truss. Investors were reassured by what they perceive as a more fiscally prudent Prime Minister, who also retained chancellor Jeremy Hunt who has already scrapped the majority of Truss’s earlier proposed tax cuts. As of 12pm London time, the 30-year Gilt yield fell to 3.51%, whilst the 10-year gilt yield fell 65 basis points to 3.46%. Elsewhere major government bonds also rallied, with the 10-year German bund trading lower at 2.1% whilst the US 10-year Treasury yield fell 20 basis points to 4.01%.

European natural gas prices briefly drop below €100

The benchmark Dutch 1-month gas futures price dropped as low as €93.35/MWh on Monday, before finishing the week at €112 as of 12pm London time thanks to oversupply of natural gas and milder weather in Europe more recently. This marks an approximate 70% fall from its record price in August. Short-term Dutch gas spot prices for delivery within an hour, which reflect real-time European market conditions, also briefly dipped below €0 on Monday because of oversupply. With Russia cutting off their pipeline, Europe is attempting to secure as much fuel ahead of winter. However, storage facilities are close to full and tankers carrying liquefied natural gas are lining up at ports unable to unload their cargoes, sending prices lower.

Resolving Money Matters In Divorce

Agreeing financial arrangements can seem daunting

If you’re going through a divorce, it’s important to understand that pensions are an asset in the same way as your house or other savings. In many cases, the personal or workplace pensions of you and your partner will be taken into account when a divorce financial settlement is worked out.

Dividing up any pensions you have will usually be one of the biggest financial decisions you need to make. Agreeing financial arrangements in your divorce can seem daunting; there are so many misconceptions and myths as to what each party is entitled to that it gets confusing.

Pension fund or funds be treated as an asset

The rules surrounding dissolution of a registered civil partnership are the same as those for divorce. We’ve used the term ‘divorce’ to mean the end of a registered civil partnership as well as the end of a marriage.

Pension funds are an asset, just like your home or the savings you might have in the bank. That’s why it’s usual for your pension fund or funds to be treated as an asset that should be divided between you and your spouse or registered civil partner in the event of divorce or dissolution of a registered civil partnership.

Valuable asset split fairly between you

This may not necessarily happen, particularly if you both have similar amounts invested in pension funds. However, if one partner has built up a significant fund while the other has stayed at home to look after children, for example, experienced divorce lawyers will be needed to help you understand the best method of making sure that this valuable asset is split fairly between you.

Pensions can be complex and confusing at the best of times. Frequently, one person has a substantial pension and the other might have none or a very limited pension provision because, for example, they have given up their job to look after the children. A decision will need to be made as to whether that pension or pensions should be shared or if you should receive more of another asset, such as the home, instead.

Universal valuation method for pensions

It is important that pensions are considered in the financial settlement to arrive at an accurate valuation. The universal valuation method for pensions is the Cash Equivalent (CE). A divorcing couple will inevitably be required to obtain CEs for each pension scheme of which they are or have been a member. The advantage of CEs is that they are easily obtainable and provide an approximate ‘snapshot’ value of a pension fund.

The difficulty is that, in some circumstances, the CE can provide a wildly inaccurate valuation. The CE, which will be calculated by the trustees of each scheme in accordance with their own rules, is a calculation of the cash sum that the scheme will pay to discharge their obligation to pay income in retirement.

The value of the pension benefits to the individual member may be very different, and it may cost far more to purchase equivalent benefits on the open market. This can be important in a divorce context, where using only CEs can produce unfair outcomes. There are a number of different approaches to tackle pension assets depending on the circumstances of the couple concerned.

Pension sharing

Pension sharing is the preferred route of most divorce courts. Thanks to the Welfare Reform and Pensions Act 1999 (WRPA), this allows one party the opportunity to secure a percentage of their spouse’s pension rights and to put that percentage into their own name.

This is preferable in many cases because a person can feel more in control of their own future rather than being dependent on an ex-spouse. They can decide when they retire, and if the recipient dies before retirement, the pension investment can be paid to children or a new spouse.

It is important to note that when a pension is divided or shared, this does not mean that the recipient will receive a cash lump sum. A pension or part of a pension that is ordered from one party to another still remains a pension and has to be invested in a pension plan. If the pension is in payment already to the older spouse, a deferred order means that the pension is shared with the younger spouse when they reach retirement age.

What exactly can be divided depends on where in the UK you’re divorcing

In England and Wales: the total value of the pensions you’ve each built up is taken into account. This doesn’t only mean the pensions that you or your ex-partner built up while you were married or in a registered civil partnership, but all of your pensions (except the basic State Pension).

In Scotland: only the value of the pensions you’ve both built up during your marriage or registered civil partnership is taken into account. This means that anything built up after your ‘date of separation’ or before you married or became registered civil partners doesn’t count.

Offsetting

With this option, the pension holder keeps their pension fund intact, which is offset by giving the other spouse a greater share of other assets such as cash savings or equity in a shared home. Offsetting involves balancing the pension fund against other matrimonial assets, such as the house. For instance, the wife might cede the pension fund to her husband in return for a larger share of the profits from any property.

Anyone considering this route should think about it very carefully because of the different nature of capital assets and pensions. Pensions are not liquid assets and, as such, can only be turned into cash on retirement. Their value on retirement could be much higher than at the time of assessment.

Earmarking

With earmarking, the court awards to the former spouse a percentage (it can be 100%) of the income the other party gets from the pension. This seems fairly straightforward and fair. However, it has numerous disadvantages – for instance, the income stops on the death of the pension holder or if the wife remarries.

Deferred lump sum order

This leaves the pension fund intact for the time being, on the understanding that both parties will receive an agreed lump sum at the time of the pension holder’s retirement.

Pension attachment order

A portion of the lump sum and/or pension income will be paid to the other spouse when the pension holder retires, based on the fund’s value at that time. While there are advantages and disadvantages for both parties in this option, it should be noted that this doesn’t achieve the clean break many people desire, and also removes quite a lot of certainty, particularly for the party who must wait for their former spouse to decide to take their pension.

State pensions and divorce

Your basic State Pension can’t be shared if you divorce. However, under the current rules, if one of you has paid enough National Insurance contributions, this could increase the State Pension the other gets, providing they don’t remarry or enter a registered civil partnership before they reach their State Pension age.

If you have an additional State Pension, you may have to share this with your ex-partner. But if they later remarry or enter a registered civil partnership, they could lose this right. From 6 April 2016 onwards, neither the old basic State Pension nor the new State Pension can be shared.

However, if you get divorced and the court issues a ‘pension sharing order’, you or your ex-partner may have to share any extra State Pension entitlement you’ve built up, such as an additional State Pension or any protected payment.

The process of considering pensions in a financial settlement should be as follows:

Find out what pension provision there is, (private, company and state) and secure a valuation and forecast
Decide with your lawyer and professional financial adviser if the amount of the pension and the facts of your case make further investigation justifiable (i.e. cost versus benefit). Further investigation can mean a drastic increase or reduction in the pension asset, frequently seen with Final Salary Pensions and with Government and Civil Service pensions, such as those that teachers and members of the Armed Forces have
Decide how to adjust the settlement in the light of this knowledge

Time to consider your options

The most common question people ask is: ‘Do I need to share my pension?’ There is no simple answer to this question as it will depend on other factors. What other assets are available to be shared? What is the value of your pension? Does your spouse have savings, investments and pensions in their own name? Are you willing to ‘offset’ the value of other matrimonial assets to enable you to keep your pension? There are also many different types of pension, and their terms and value can differ. You and your spouse may have a State Pension, a company pension and perhaps a personal pension too.

Your first step, therefore, is to quantify your pensions alongside your savings, shares, investments and any property or business interest you may have. Having quantified the pension assets, you can then consider fully your options in relation to your pension.

Market Update Monday 24th October 2022

Mixed third quarter company results lead to a choppy week in markets

It has been a choppy week for equity markets as third-quarter company results have taken centre stage, as investors look for evidence of inflationary pressures, rising borrowing costs, and challenging economic conditions. US global investment banks, although reporting weaker earnings, nonetheless beat forecasts, as earnings from consumer lending helped to temper falling investment bank revenues. Along with news that the UK’s new Chancellor of the Exchequer, Jeremy Hunt, had thrown out almost all of the mini-budget tax cuts, these brought a fillip to the beginning of the week. However, later, results from the likes of Procter & Gamble and Nestlé pointed towards falling earnings, as consumers traded down to minimise the impact of inflation.

Low US initial jobless claims reinforce expectations of further rate hikes

The bearish end to the week was reinforced by the latest US initial unemployment claims figures, which unexpectedly fell from 226,000 in the previous week, to 214,000, quickly erasing any thoughts of a Federal Reserve (Fed) pause in the rate hiking cycle.

Resignation of the UK’s Prime Minister, Liz Truss, goes by largely unnoticed by markets

The resignation of the UK’s Prime Minister Liz Truss after just 44 days in the job went by almost unnoticed by markets. However, by Friday, as talk of a Boris Johnson comeback materialised, Sterling fell, and UK gilts sold off as the effects of uncertainty came to bear once more. As of 12pm on Friday, London time, US equities rose 2.3% over the week, with the US technology sector climbing 2.8%. European equities were flat, whilst the UK market crept up by 0.1%. Japanese stocks fell by 0.9%, with the Japanese Yen weakening to ¥150.96 versus the dollar, the lowest point in over 32 years. Australian equities fell by 1.2%, whilst domestic Chinese ‘A’ shares lost 1.1%, and Hong Kong stocks dropped by 2.3%. However, Latin American stocks rose by 5.1%, dragging up the Emerging Markets to finish 0.2% higher.

UK borrowing costs fall after the abandonment of the mini-budget

10-year US Treasury yields, which move inversely to price, rose to 4.31% and German bunds yields traded up to 2.50%. However, following the abandonment of the mini-budget, UK gilt yields fell as low as 3.78% on Thursday as Liz Truss resigned, however, by Friday they were creeping up once more, now trading at 4.08%. Sterling, having rallied back up to $1.14 and €1.16 on Monday, is now trading back down at just under $1.11 and €1.14.

European natural gas prices continue to slide

Gold fell 1.6% on expectations of continued tightening from the Fed, currently trading at $1,623 an ounce. Whilst Brent crude was steady over the week, rising 0.8% to $92.4 a barrel. European natural gas prices continued to fall, falling by 19% over the week, now trading at €114.5 megawatt hour, or a 63% fall since its peak at the end of August. However, it remains more than five times as expensive versus the beginning of 2021.

Before You Retire

Make sure you achieve the financial future you want

An increasing number of people in later life are saving little or nothing for their golden years, instead expecting to fall back on the State Pension. Some people are ‘underestimating their life expectancy’, which means that the money they do save for retirement will have to stretch further.

As millions of people move to within a decade of their State Pension, many have still not thought about how long their retirement might last. It’s worrying that so many over-50s are potentially sleepwalking into their old age and are expecting to be better off than they will be, according to research.

People need to put more money aside

It’s not too late for the over-50s to take control of their retirement plans by adjusting the amount saved, or how long they are prepared to work for. But the reality is that people need to put more money aside to ensure they’re on track to achieving the financial future they want.

Although it’s good news that people are living longer, more than a third (35%) of women and a fifth (20%) of men over the age of 50 do not have a private pension. Worryingly, 33% of over-50s don’t think they have enough money to provide them with a sufficient income for their retirement – with women more worried about not having enough money in later life than men.

Adapting financially to a new lifestyle

One of the most common difficulties in retirement is adapting to a lifestyle that meets our new level of income. After all, it can be difficult to adjust to a drop in income that comes as a result of retiring from a full-time role and then having to living solely off our own pension, or even more precarious, only the State Pension.

How much retirement money you’re going to need will depend on the type of lifestyle you want. But one of the great things about saving into a pension is the tax relief you receive. This means that if you’re a basic rate taxpayer, for every £100 saved into your pension the cost to you is just £80. This could effectively be even less if you’re a higher or additional rate taxpayer.

Did you know?
The maximum full rate State Pension is a lot less than the amount most people say they hope to retire on – for the financial year 2021/22 it’s £179.60 a week (retired post-April 2016).

Relying on a partner’s private pension

The report also highlighted that 36% of women over 50 don’t think they have enough money to fund their retirement, with just 13% suggesting they were confident they would have enough to fund a comfortable retirement.

Overall, the vast majority of over-50s thought pensions – state and private – will be the biggest contributor to funding their retirement, with 27% saying they will rely on their partner’s private pension, rising to 30% for women.

Retirement is not an age anymore

Many over-50s will look to other sources according to the report, with 12% expecting to use ‘income from work’ in later life, and 11% saying they expect to receive an inheritance. Property was also seen as an important source of income for homeowners: 14% are planning to downsize and another 6% planning to use equity release.

It can be even more difficult for those reaching retirement who have either a reduced pension or no pension at all. But it’s important to remember that retirement is not an age. Not any more, anyway. Gone are the days of being told to stop working one day and picking up your state or company pension the next. Today you have new pension freedoms to decide when and how you retire.

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https://www.sunlife.co.uk/siteassets/images/finances-after-50/financesafter-50.pdf/

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Market Update Monday 17th October 2022

Markets rally towards the end of the week despite US inflation exceeding expectations

Losses in markets from the beginning of the week were partially reversed as a powerful rally in equity markets gained ground on Thursday, despite the latest US inflation data coming in stronger than forecast. Whilst the rally in markets was not intuitive, commentators put it down to a combination of markets being oversold and weakening lead indicators, such as a fall in US rental costs. UK gilts and the British pound also rallied, as expectations rose that the UK government was going to row back further from the tax-cutting pledges made in the mini-budget, as the chancellor, Kwasi Kwarteng was expected to be sacked on Friday.

Emerging markets tumble as China tightens COVID restrictions

As of 12pm on Friday, London time, US equities rose 0.8% for the week, whilst the US technology sector was flat. European equities rose 0.7%, whilst UK equities fell 0.9%, with the Bank of England expected to have to hike rates more aggressively to counteract the government’s growth plans, in order to get inflation under control. Japanese stocks lost 0.45%, whilst Australian equities fell 0.1%. Emerging markets were hit particularly badly, falling 4.8%, with the Hong Kong Hang Seng falling 6.5% as China tightened Covid curbs, warning against any relaxation in its fight against the coronavirus.

UK Government bonds rally as expectations grow for the mini budget to be scrapped

Government bonds sold off at the beginning of the week, as UK pension funds managed by liability-driven investment managers continued their forced selling of assets to meet margin calls from banks. On Tuesday, the Bank of England extended its emergency bond-buying programme to include index-linked bonds, helping to dampen the extreme levels of volatility experienced in recent days. By the end of the week, on expectations of a U-turn by the UK government, bond prices rallied, with the yield on 10-year Gilts, which moves inversely to price, falling from a peak of 4.61%, down to 3.95%. 10-year US Treasuries yields, which also bounced around during the week, finished the week at similar levels to where they started, trading at 3.89%. It was a similar story for German bunds, with yields back at 2.19% by Friday.

Despite gains this week, Sterling still down by over 16% versus the dollar year to date Sterling recovered some of its losses against the dollar, trading at $1.125, and against the Euro, at €1.155. However, this still leaves sterling down by over 16% against the dollar year to date, and just over 3% against the Euro.

Gold falls as US inflation remains stubbornly high

The US inflation data took the shine off gold this week, as expectations remain high for a further 0.75% US interest rate hike in November. Gold fell by 2.9%, now trading at $1,660 an ounce. Crude oil also fell, giving back some of its gains last week, following the announcement of supply cuts by Opec+ (Organisation for Petroleum Exporting Countries + Russia), with Brent crude dropping by 4.4%, now priced at $93.6 a barrel. European natural gas also weakened further, dropping another 7% this week, now priced at €145.3 a megawatt hour.

Market Update Monday 10th October 2022

Markets rally as the UK government commits to a partial climb down on its unfunded tax cuts

Markets rallied strongly at the beginning of the week as the UK government backtracked on its plan to cut the 45% tax band for higher earnings, whilst softer economic data out of the US gave hope of a pivot in the interest rate cycle. However, the rally paused mid-way through the week, whilst investors wait for the latest US jobs data report, the non-farm payrolls, due out today at 1.30pm London time. Expectations are for 250,000 new jobs to have been created in September, down from 315,000 in August.

As of 12pm on Friday, London time, US equities had rallied by 4.4% over the week, with the technology sector rising 4.7%. European equities increased by 2.3%, with UK equities advancing 1.7%, both held back by a greater probability of a recession and heightened concerns over the willingness of Russia’s President Putin to use nuclear weapons on the battlefield in Ukraine. Japanese stocks rose by 3.9%, whilst the Australian market was up 4.5%. Emerging markets increased by 4.0%, with Latin American stocks rising by a massive 8.9%.

Government bond rally fizzles as quickly as it arrived

Government bonds staged a strong relief rally at the beginning of the week after the Conservative party’s partial climb down on its unfunded tax cutting agenda. This was closely followed by the latest new jobs opening data out of the US, which reported 10.1 million job openings in August, lower than the 11.2 million reported in July and beneath forecasts of 10.8 million. This led to a rally in government bonds, with yields, that move inversely to price, falling from 3.80% on the 10-year US Treasury to 3.56%. However, the buoyant mood was short lived as investors questioned the idea of an imminent pause in the US hiking cycle. This was reinforced by an interview on Thursday with the Chicago Fed’s President, Charles Evans, saying rates will probably rise to 4.5% or 4.75% next Spring before pausing. By the end of the week 10-year US Treasury yields ended up higher than at the start of the week, at 3.84%. It was a similar story for German bunds and UK gilts, with the mid-week rally vanishing. German bunds are currently yielding 2.16% and UK gilts 4.20%.

Crude oil rises as Opec+ agrees to cut production by 2 million barrels a day

Gold rose over the week by 2.7%, now trading at $1,717 an ounce, as markets anticipate a pause in the rate hiking cycle, whilst also offering haven status should the Ukraine Russian war escalate further. Crude oil rose sharply as Opec+ (Organisation for Petroleum Exporting Countries plus Russia) agreed a cut by 2 million barrels a day in response to the recent slide in oil prices. Although in truth, it’s not clear what impact this will have in the medium term as the Opec+ countries are already producing less oil than their quotas allow. Brent crude rose by 8.6%, now trading at $95.5 a barrel, whilst US WTI (West Texas Intermediate) jumped 12.6%, currently priced at $89.5.

Issues under discussion

Investors are trying to second-guess a pivot

The sharp move upwards in markets this week underlines how much investors are trying to second guess a pivot in the Fed’s monetary policy stance. Investors are aware, historically speaking, how quickly markets have rallied at this inflection point. However, we need to be mindful that inflation remains at very elevated levels versus recent history, and that even if the US employment picture is weakening, the forecasts still remain at very robust levels.

Market Update Monday 3rd October 2022

UK government bond turmoil ripples around the world before the Bank of England intervenes

Government bonds sold off sharply this week, led by UK gilts, following the UK Chancellor of the Exchequer’s mini budget last Friday when he announced up to £45 billion worth of unfunded tax cuts. On Monday, the pound fell to a record low versus the dollar of $1.035, followed by sharp upward moves in gilt yields, which move inversely to price, as the 10-year yield hit 4.59%, with 30-year yields touching a 20-year high in excess of 5%. This forced up government debt yields around the world, as 10-year US Treasury yields went above 4%. The selloff in UK gilts was eventually put down to forced selling by pension fund liability driven investment strategies, or LDI, having to meet derivative margin calls as gilts sold off sharply. It was not until the Bank of England intervened, promising to buy up to £65 billion of gilts, that some sort of normal order resumed, with government bonds staging a rally as yields came back down. The sharp increase in debt costs only served to increase recession worries, dragging equity markets down in tandem.

Domestic orientated UK equities feel the pain

As of 12pm on Friday, London time, US equities fell 1.4% over the week, whilst European stocks dropped 1.2%. The UK market fell 2.5%, although by far the most pain was felt in mid cap stocks which lost 5.7% of their value. Japanese stocks fell 4.2%, whilst Australian equities dropped by 1.5%. The emerging markets sold off by 3.6%.

10-year UK gilt yields settle back down, having hit 4.59% midweek

Bond markets had settled down by the end of the week, following the Bank of England’s intervention, with 10-year US Treasuries currently yielding 3.71%, German bunds 2.09% and UK gilts 4.05%. The Bank of England, which was about to start selling down its gilt holdings as part of its efforts to get inflation under control, has committed to buying £5 billion of gilts a day up to the 14th October, thereby providing liquidity to LDI pension fund schemes.

Sterling rallies from its record low of $1.035

The pound has also rallied from its record low versus the dollar, now trading just under $1.11 and just over €1.13. Where UK asset prices go from here in the immediate term will be largely dictated by government policy. So far, the Prime Minister, Liz Truss, and her chancellor, have committed to ploughing on with their fiscal easing whilst introducing supply side economic reforms to boost growth. However, they have also agreed to work with the Office for Budget Responsibility to try to persuade financial markets and the public that their plans stack up. The biggest push back so far, has been the idea that the government is trying to boost growth, whilst the Bank of England is trying to reign in demand to squash inflation, somewhat diametrically opposed policies.

European natural gas prices fall, despite sabotage on the Nord Stream pipelines

Amidst the turmoil, gold rallied by the end of the week, rising 1.2%, now trading at $1,675 an ounce. Similarly, so did crude oil, up by 2.8% for the week, priced at $88.6 a barrel. Whilst European natural gas, having spiked by close to 18% on news that the Nord Stream 1 and 2 gas pipelines had been ruptured after a series of explosions, finished the week down by over 6%, trading at $169 a megawatt hour. Although no one has taken responsibility for the damage, all fingers are pointing at Russia whilst experts have said only a state actor could have carried out such large explosions.

Rethinking Plans

Pessimism about achieving retirement goals due to impact of the pandemic

The coronavirus (COVID-19) pandemic crisis has thrown the retirement plans of some of the nation’s retirees up in the air. As a result, a number of people over 50 and in work are set to delay their retirement (15%) by an average of three years, or keep working indefinitely (26%), as a direct result of COVID-19, according to research.

The pandemic is forcing a widespread rethink of retirement plans. Currently 1.5 million workers aged over 50 are planning to delay their retirement as a direct result of the pandemic. The most recent data from the Office for National Statistics highlights that the number of workers aged above 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.

Five years or more retirement delay

One in six people aged over 50 and in work (15%) believe that they will delay, while 26% anticipate having to keep working on a full or part-time basis indefinitely, due to the impact of the virus. On average, those who plan to delay their retirement expect to spend an additional three years in work.

However, 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. One in five (19%) of these workers will delay and 38% expect to work indefinitely.

Forced to rethink retirement plans

The financial impact of the COVID-19 pandemic seems to be particularly pronounced for people aged over 50 who are still in work. While some people will choose to work for longer, or indefinitely, the key consideration when it comes to this research is that it seems this decision has been driven by the financial impact of the pandemic, rather than personal choice.

“Should I postpone my retirement due to the coronavirus? Is postponing retirement the right strategy? Or does staying with my original retirement strategy make more sense?”

According to the report, one in five (18%) plan a change to their target retirement age, and 20% of over-55s who hadn’t accessed their pension prior to the crisis have since taken out money from their pension (12%) or are considering doing so (8%) because of the pandemic. The self-employed have been particularly affected, with two in five (40%) forced to rethink retirement plans and 22% now expecting to delay their retirement.

5 reasons to delay taking your pension:

Your pension has longer to grow
You can maximise your investment potential before moving to safer assets
Your employer will keep topping up your pension
You’ll continue to receive tax relief on pension contributions until age 75
Delaying your State Pension can boost your payments

Impact on people’s ability to retire

This is a key stage in people’s retirement planning, so seeing a material impact on household income will naturally lead to pessimism about achieving retirement goals. While it would be naive to say that these financial issues will not have an impact on people’s ability to retire, it’s important for people to have a strong understanding of the options available to them before concluding that their retirement needs to be delayed or forgotten indefinitely.

That employment uncertainty, in combination with volatility in the financial markets, is understandably concerning to some people approaching retirement age. In particular, those who have been furloughed or seen a pay decrease could benefit from a financial review to assess their options before changing their plans.

1. Opinium Research ran a series of online interviews for Legal & General Retail Retirement among a nationally representative panel of 2,004 over-50s from 15–18 May 2020.
2. Office for National Statistics, Labour market overview, UK: May 2020
3. https://www.cofunds.aegon.co.uk/content/
4. ukcpw/customer/news/covid-19_has_widereachingimpactonretirementplans.html

Month: October 2022