A coronavirus special podcast

19 March 2020

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Find out how the Coronavirus is impacting pension investments

Katie Eagles and Kirsty Ross from our investment solutions team discuss how the coronavirus headlines could affect our customers’ pension investments.

[ Katie ]

Hi I'm Katie and this is Kirsty. And we're part of the investment team at Royal London. We're here to give you an update on how the corona virus might be impacting your pension and some of the things to think about if you're unsure what to do. 

And I should say that this is important for everyone invested in a pension so people who are still paying in and particularly people who are at the stage of taking money out.

So Kirsty, it will have been very difficult to miss the developing news stories regarding the coronavirus and the impact that's having on a global scale at the moment. We've got large parts of some countries on lockdown, sporting events being cancelled, transport links being restricted. So, there's a lot going on. But why is all of this relevant to pensions

[ Kirsty ]

OK. Well in a nutshell irrelevant because your pension is an investment and the value of investments go up and down depending on what's going on in the world. So, Katie what you've just described as a range of containment measures being taken to try to prevent the spread of the virus, which from a public health perspective as is of course a no brainer but from a business perspective these measures can actually be quite damaging. So for example any business which sells products wholly made or parts or with parts made in China will be struggling with supply issues at the moment. Apple is a prime example. They've already warned that there could be an iPhone shortage soon which will of course hurt their profits. Travel companies are another good example they are being hit too because nobody wants to fly anywhere at the moment. Pensions are invested in these type of companies and markets have a habit of reacting very strongly to news like this. So, what people will be experiencing to snow is that the value of their pensions could have dropped quite significantly over the past week or so.

[ Katie ]

Yes. And what we don't know at the moment is how effective these measures will be in containing the virus. So, we don't really know yet what to expect in terms of whether things are going to get more or less restrictive over the coming weeks. So, pensions values could actually go up and down quite a bit while we get more clarity. What should people be doing with their pensions in the meantime?        

[ Kirsty ]

So, the most important thing to remember is that pensions are a long term investment and that making decisions based on what's happening in the short term can actually be a very risky thing to do. It might be tempting for example to move investments into cash for a while but if you do that then you might miss out on the point when the values go back up. So, you could lose out in the long term. The second most important thing to remember is that in most cases and certainly for most Royal London customers, pensions are invested across a mix of assets to spread the risk and reduce the impact. And, there's a team of highly experienced investment professionals who are making decisions on your behalf aiming to maximize your long-term outcomes. So, my guidance overall would be not to take any rash decisions but to make sure you've taken time to understand all of your options and the pros and cons of those options and this might mean you need to speak to a financial adviser if you're not sure.

[ Katie ]

Yeah definitely. We've got tax year end as well as a budget statement coming up so people will be wanting to make sure they've made the best use of their various reliefs and allowances, should they carry on as normal?

[ Kirsty ]

Well actually most of that will be people wanting to put money into their pension and putting money in where markets are down like they are at the moment could actually be a really good thing for long term outcomes, because you're essentially buying your investments at a lower price. And the hope and the expectation is that the value will go up again once everything blows over. But of course, that's not a guaranteed outcome.

[ Katie ]

And what about people taking money out of their pension?

[ Kirsty ]

Yes. So, this is where it is really important to think through all of your options and the implications of those options. So, withdrawing money from investments where markets are down tends to be a bad idea if you can avoid it because you're essentially selling investments at a lower price. And once it’s out you've lost the opportunity for the value to go back up when everything blows over so basically the opposite of what we've just been talking about. Now the obvious complication here is that not everyone has the option to delay taking money out of their pension. Again, it's really important to seek financial advice about this. If you're not sure what to do because advisers will be best placed to go through all of your options and help you decide on the best course of action.

[ Kirsty ]

Great. Okay. Thanks Kristie.

So just to summarize the key points; you might see the value of your pension has gone down. But don't panic and don't make any rash decisions. Pensions are long term investments and it's very normal for investments to go up and down in value. The company managing your pension should be very used to dealing with this type of event and they should be making decisions to help maximise your pension value in the long term. If you're thinking about switching investments or if you're taking money out of your pension we strongly recommend that you seek financial advice to consider your options thoroughly before taking any action.

Thank you Kirsty. And thanks for listening.

[ Kirsty ]

Thank you.

 

 

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The Royal London Mutual Insurance Society Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. The firm is on the Financial Services Register, registration number 117672. It provides life assurance and pensions. Registered in England and Wales number 99064. Registered office: 55 Gracechurch Street, London, EC3V 0RL.