Emma Wall: 2016 has so far been a year of significant stock market volatility. And while longer term investors may see this as a great opportunity to pick up bargain stocks, those approaching retirement can be forgiven for being slightly less sanguine. So what can retirees do to make sure they are not negatively impacted by this volatility?
Well, the first thing is don't panic. The new rules which came into place last April mean that you do not have to crystalise losses on retirement. You do not have to buy an annuity. You can of course just leave those pension savings in your pension savings plan and ride out the market volatility.
If you need funds immediately than have a look at your cash assets before you automatically go to your pension where taking money out will of course crystalise losses and you won't be able to make those gains back up again.
Secondly have a look at what you're invested in. Some people are invested in what's known as lifestyle pensions through their workplace pension scheme and quite often these swap out of stocks and into bonds in the run up to someone's retirement. So you may not be as exposed to these more risky, more volatile areas, as you thought.
If you are about five years from retirement there are some things to do now to make sure that when you come to retirement you are not as negatively affected as you might be. One of the things that's coming into place, and the changes that are coming into place, over the next couple of months in the U.K. are that those who are high rate tax payers will see their pension relief be reduced. This means that if you don’t take advantage of that pension relief now you may lose it forever. So if you can make sure you are topping up your pension as much as possible in the next couple of months.
Finally it sounds simple, but of course you don’t have extra income coming in retirement which means you should have a look at your spending habits. Maybe don’t make any big purchases while the market is so volatile and try and really reduce your outgoings.
