Your pension may be worth more than you think
By Nigel Callaghan | 15 Aug, 2008
Some investors want to retire now, but are put off from doing so by the worrying daily headlines of falling stockmarkets. They assume that their pension savings will be as badly affected. However, for many investors this will simply not be the case.
Many pension savers have invested in a range of funds that are typically not 100% equity based, frequently in a managed fund. These funds would commonly invest in a variety of assets including cash, gilts, corporate bonds, property and equities. This broad investment range may have protected some investors from the worst of the market falls in the last twelve months.
Since the late 1980’s, many insurance companies offered as a default option an automatic mechanism to drip feed an investor’s pension fund away from equities to more stable assets, such as gilts and cash, in the years leading up to retirement. This facility was popular with company pension schemes and many investors might not remember (or ever have known) if this option was actually chosen.
The degree that some pension funds may have held up against the market turbulence is surprisingly good, but investors won’t know how well until they check. It should take only a few minutes to get an up to date valuation from your pension company and you may be pleasantly surprised by how much your plan is worth. It could even give you the option of retiring now, should you have decided now is the right time for you.
Finally, a little bit more good news for pension investors. Level annuity rates are continuing to be one of the winners from the credit crunch. They are now at a six year high, having soared 7% this year alone, however annuity rates can fall as well as rise, and the rate you receive will be that prevailing at the time your pension fund is used to fund the annuity.
