Fidelity International has issued a stark warning that over half (51%) of the UK’s pension investors will not have enough money to meet their needs in retirement because of a drop in the value of retirement savings following the impact of Covid-19.
Fidelity’s Investor Survey captures current UK investor and found that just 29% of them believe they’ll have sufficient income to cover their retirement plans. Three fifths (61%) of investors who had been hoping to retire within the next five years have seen the value of their pension investments fall.
Maike Currie, investment director for workplace investing at Fidelity International, says: “The Covid-19 market falls will be remembered for their speed and brutality, with extreme market volatility, often over consecutive days.
“While the market has recovered some of these losses, for many the impact will be far longer lasting, with half of investors reporting a ‘pensions blackhole’ impacting their retirement plans. Pension pots that have taken decades to build may have suffered sharp losses, leaving those near retirement assessing their options for bridging the gap between their expectations and their actual income.”
Amongst those who see their savings falling short, the most popular plan is to carry on working: either full-time (36%) or part-time (35%). Some 21% are hoping for an inheritance to make up the shortfall while 18%) are planning to be financially supported by their partner.
Some options to consider
The advice from Fidelity depends on just how close you are to retirement as younger investors have the luxury of more time to see their savings recover in value.
Those closer to retirement age may look to delaying relying on their diminished savings pots by continue to work or to reduce their outgoings. If that is your chosen route, be sure to advise your pension provider about any change to your expected retirement date.
Says Maike Currie: “For those nearing retirement, working for longer may not be an option they either want or can pursue, depending on their circumstances. Similarly, they’re likely to want to hold onto their desired standard of living as much as possible.
“Drawdown allows you to remain invested for as long as possible – benefiting from potential market recovery – while also offering you access to flexible income. However, always make sure you have sufficient cash or a guaranteed income – this could be your state pension, an annuity or defined benefit pot – to cover the essentials.
“As Covid-19 has taught us all, you really never know what is waiting around the corner.”
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