Retirees to reconsider pension plans after Covid-19
New data reveals that retirees are already taking steps to revisit their pension plans due to the impact of Covid-19, although non-advised pensioners are much less likely to have taken action.
By the end of April, one-in-four advised clients were already looking to make some tweaks to their pension plan, the research conducted by Quilter shows.
In contrast, just one-in-20 non-advised retirees said they were planning to change tack.
Quilter’s survey of UK adults asked consumers how they were managing the financial impact of the Coronavirus pandemic. Retired participants were asked about their pension plans, and whether they planned to make any changes or not.
The data shows that reducing withdrawal rates is the most common step among advised clients, with 9 per cent saying this was something they were looking at. A further 6 per cent said that a return to work was a possibility.
Overall around 25 per cent of people with a financial adviser said they were looking at making some revision to their plans, with equity release or unlocking value in a second property also being considered.
In contrast, only a relatively small minority of non-advised people reported that they were planning to make any changes to their pension plans, with 95 per cent saying they weren’t yet making any changes.
Ian Browne, retirement expert at Quilter, says: “Managing a retirement plan is a careful balancing act. A prosperous and comfortable level of retirement income needs to be balanced against protecting the longevity of savings. Retirees need to keep their plans under regular review to ensure that they’re on track as their circumstances change.
“Understanding the impact of a fall in the market in retirement is complex. This is not the same as for those customers in accumulation where they have time to ride out the storm. For retirees, they need to understand the long-term impact on the sustainability of their pension, and consider whether it is necessary for them to adapt their plans.
“This could include reducing withdrawals, tapping into other assets such as cash reserves, unlocking value from property, or for those newly retired, considering whether a return to work is the best course of action.
“There is no silver bullet and it is important to make sense of these options and the impact each could have. Doing so with the help of an adviser will enable people to make informed choices, and this data suggests that within six weeks of the lock down starting, a quarter of advised clients were already making adjustments.
“Non-advised retirees should be cautious about burying their head in the sand and hoping for the best. This is unlikely to yield a good outcome and they could do lasting damage to retirement plans, causing strife later in their retirement journey.”