As the number of coronavirus cases in Ireland continues to grow, and economic uncertainty along with it, many people are asking “is my pension safe” or “should we move our money cash or deposits?”
There have been further losses on global stock markets over the last few days – these are in addition to two weeks of declines relating to the Covid-19 coronavirus spread.
With the amount wiped off global shares (and by default pension monies) now heading into the trillions, concerns are growing about the longer-term impact the coronavirus may have on share values and when this is likely to end.
If you have money tied up in investments – perhaps through a pension – you may also have concerns about what it ultimately means for your pocket. Here are a couple of the more common questions flooding into our offices:
I have a pension/investment bond – what exactly should I do?
Firstly, and this is crucial – don’t panic and don’t overreact. Our clients are being advised to avoid making rash decisions in the face of the stock market slump.
Investors who “sell out” in a fallen market are almost always mistaken in doing so!
The reason for this is simple as markets tend to recover from these kinds of slumps once given enough time.
For example, the circa 30% drop in pension values in 2008 had bounced back to parity within 12 months.
Time is the crucial component. Even clients of ours who are due to retire in roughly five years should have more than enough time to see their pension pot recover.
I’m due to retire over the next 12 months, will this have a major impact on what pension I receive?
Any good financial broker should be taking retirement age as a mitigating factor in recommending the level of risk a client should take and therefore values shouldn’t be adversely affected with the recent market slump.
However, if people are unsure about their own investments or pensions, they should speak to their provider to get a better understanding of how their money is allocated and what level of risk is involved.
I can’t handle the uncertainty; how can I reduce the risk in my pension/ investment fund?
It’s our mantra when advising clients but it rings through, clients should only lock away money in the long-term when they can afford to do so – and should always ensure they have access to cash at short notice or their “rainy day” fund.
People can also ask their pension providers to switch their money to lower – or higher – risk funds at no cost, if they and their advisor feel that is the most appropriate course of action.
Our greatest fear is that a client will insist on cashing out and taking a loss but don’t buy back into the markets to avail of gains on the upside.
The best advice is to people to take professional financial advice and avoid any rash decisions.
Joe Bruen is managing director of Bruen Financial in Galway City, an award winning financial brokerage. To see what they can do for you go to www.bruenfs.ie