Cleona Kinahan, M.Sc CFP® QFA FLIA
So, how is your pension affected by the current crisis… These last few weeks may have been a time of extreme financial worry for many. At O’Leary Financial Planning we are available to help answer your queries on your financial plans, budget, or just general money queries. You don’t have to be an existing client for us to help you. Whatever your query you can drop us an email email@example.com or call us on 091 778677 to arrange a video call. In recent weeks we have received a number of queries regarding your pensions so I thought I would share the more common questions with you.
Q) The value of my Pension has dropped, should I switch now and protect what is left?
No. Pension investors tend to be long-term investors, i.e. you are saving money now for your future self, for a time when you retire. Yes, the value of the shares and other assets in your fund have fallen in value but you still own the same amount. You only experience a real loss if you sell out of the fund that you are in. The common default investment funds that many pension investors are exposed to are risk-appropriate for a person’s age and term to retirement. Don’t panic! Remember that you are likely to be several years from accessing your pension pot and markets will recover in the medium term.
Q) I had planned to retire early but hadn’t got around to de-risking my strategy?
If the value of your fund has fallen significantly you might need to consider deferring access to your fund until it recovers in value. You might be in a position to use other cash assets to tide you over in the short term or delay retiring. This crisis has hit every asset class. The impact of COVID19 across the world could not have been predicted by even the best investor. Call us and we can go through your options with you.
Q) Should I continue to invest in my pension even though the value of my fund is down?
Yes, absolutely. If your budget still allows you to continue at your long-term savings rate, it is the best time to be investing in buying great companies that are approximately 20% cheaper than last month. The stock market seems to be one of the only markets that investors like to buy when it’s expensive and rush to sell when it’s cheap’.
Q) What options do I have If I have lost my income and can’t afford to save at the moment?
Most plans allow for premium holidays or a break from investing. We recommend that you contact your Pension advisor so that they can help you communicate with your provider exactly what needs to happen. Don’t just cancel your Direct Debit Mandate. Every provider is allowing increased flexibility at the moment, talk to your advisor.
Q) I was saving in my personal pension to help reduce my 2019 Tax Bill, what should I do now?
Don’t worry, you have until 31st October or Mid-November 2020 to make a pension contribution (within certain limits) and reduce your 2019 Income Tax/2020 Preliminary Tax Bill.
Q) I’m a member of a group scheme, can I reduce my own contribution?
You need to check with your Employer or Pension advisor, many pension schemes have a minimum employee % contribution in order to avail of the Employer contribution so you might temporarily lose the Employer’s % as well. Engage with your Employer, you might be able to opt out for a short period of time until this crisis passes.
If any of these questions resonate with your situation and you want to have a chat with one of our advisors, click here to schedule a 15-minute chat.