Just a little over a week after the UK voted to depart from the European Union (EU), Lending Works offered pension advice to the country’s retirees (or soon to be) following the surprising decision.
The peer-to-peer lending platform shared:
“Less than a week in, and the fallout from Brexit has been immense. The prime minister has already been a casualty, and the political and economic upheaval appears to have only just begun. The markets and the pound predictably responded negatively on Friday; albeit that they have shown some signs of recovery since. It remains early days though, and ours isn’t the forum upon which to speculate about what lies ahead. Nevertheless, the ramifications of Brexit have already bared their teeth, and what’s certain is that many months and years of uncertainty lie ahead. Among many in the firing line are those with pensions and retirement plans. Understandably, for those approaching their golden years, the current volatility can be most unsettling, especially if your portfolio is heavily linked to the stock market.”
Lending Works then revealed the following ways that customers should watch their retirement plans:
- Keep the original plan: No panicking. Basically, a “keep calm and carry on” situation. The website noted, “Bear in mind too that fluctuations in investments are part of the deal, and a well-diversified portfolio will likely ‘right’ itself over time. So stand your ground, and don’t indulge in a panic-stricken fire sale.”
- Keep saving/contributing: This is mainly advice for those who are still years away from retirement. Lending Works’ team explained: “We must [emphasize] the importance of allowing time for savings and shares to recover. In fact, falling share prices could even present an opportunity to buy cheap – albeit there is the ‘catch a falling knife’ caveat, and the need to view such decisions as a long-term investment.”
- Play it Safe: The company stated those who are retiring in five years should consider playing it safe for the time being. “Consider moving a chunk of your savings into less risky assets like bonds, or even cash if you are very risk averse. Most workplace pension schemes adjust portfolio risk as you get older anyway, so this should offer some protection.”
- Consider more investments: Lending Works suggests that the best weapon is to “spread your risk over a wide range of investments from different asset classes.” The website also encouraged those who are already retired to not use their nest egg funds for starting new opportunities like trying to play the stock market, and buying low in the wake of the Brexit decision due to the high risks.
- Avoid frequent bank withdrawals: Lending Works noted the rule of thumb for “drawdown retirees” is to withdraw no more than 4% of their accounts each year.“The important thing is to avoid dipping into your reserves too heavily at difficult times like these – be that for spending purposes or an attempt to expand your investment portfolio.”