Market volatility and the impact on Pension Schemes and strategies due to the Leave vote.
The UK’s decision to leave the European Union has already created implications for pensions, and the impact will continue to make inroads into the sector.
Financial markets have lost significant value, and the key question for fund managers of pension schemes is how their schemes’ governance structures are going to perform. We are highly recommending individuals to review their pension schemes and speak to a financial advisor. If you are unsure about the current status of your pension or would like a second opinion contact us now here.
As the fallout of the Brexit decision is felt internationally, combined with the uncertainty with the upcoming US elections in November, individuals need to be confident that their risk management capability is appropriate for the level of risk that pensions represents to their business and personal wealth.
The financial market impacts will have worsened the projected outcomes for defined contribution savers. The current volatility has raised several questions which everyone should take into consideration.
PWC outlines Key questions to be considered:
- How has your investment strategy performed relative to expectations for volatile markets?
- Does the proposed de-risking strategy still make sense?
- How well did existing risk-mitigation strategies hold up to the volatility – are they fit for purpose?
- Have you lost a significant amount of money already?
It is important for us to openly discuss the threats and opportunities for businesses arising from Brexit, and funding and investment strategies should remain consistent with the long-term market outlook.
This uncertainty has raise several key question which in everyone’s mind at the moment.
- What is the impact of short-term market volatility on people retiring over the short term?
- Will people need to postpone retirement?
- What is the longer-term impact on pension schemes and the ability of the workforce to retire when expected?
The short-term emphasis in the pension sector will need to be on good governance and vigilance as to the unfolding impact of Brexit. In all of this, it will also be important to keep a long-term integrated view, consistent with the nature of most pension commitments.
However, financial advisers and wealth managers have warned investors not to move their portfolio around too much amid the current market volatility. Rash readjustments to portfolios bring the danger of exposing yourself to other risks.
Too much money in any single asset class would be a bad idea at the moment.
If you have stocks in your portfolio, be aware of the differences in performance between the two FTSE indices.
In the days since the referendum result, the more internationally focused FTSE 100 has bounced back, whereas the more domestically focused FTSE 250 index has struggled to regain losses.
If you do want to adjust, making sure your portfolio is well diversified geographically is key. Investing in overseas equities means your portfolio is less vulnerable to further declines in sterling. Contact Alpha Wealth now for further advice.