5 Points for Drawdown Investors Since the Brexit Vote

Drawdown gives the opportunity for an increasing income that many brexit-684134investors look for in retirement. Stock market volatility after political events not uncommon, but it is something to bear in mind if you opt for drawdown. Investments rise and fall in value; this volatility makes drawdown a higher risk option than an annuity, which provides a secure income for life. Your income could reduce, or even run out, if investments don’t perform as you hoped, you take too much out or you live longer than expected. It needs regular management to make sure you are on track to meet your aims.

1. Think about your goals for the drawdown plan

The flexibility it provides means a wide range of investors with different aims have taken advantage of drawdown. Some investors don’t plan to draw any income, others want to draw a sustainable income throughout their retirement while some are happy to make large withdrawals which deplete the fund quickly.

It’s important to think carefully about what you want from your drawdown plan. This is likely to heavily influence where you invest and how much you withdraw.

2. Review your withdrawal strategy

Withdrawing income makes managing a drawdown plan more complicated than managing a pension before retirement. This is because deciding how much to withdraw and when to make the withdrawal is often not easy. Excessive withdrawals will deplete your fund so getting your strategy right is very important.

Selling investments to fund withdrawals while markets are falling will make it harder for your fund to recover from any losses. If you are worried about whether it is the right time to sell investments you could consider delaying the withdrawal or making a smaller withdrawal.

One approach to mitigate the risks of drawdown is to only withdraw the income your investments produce. This is known as drawing the natural yield. By taking this approach you could help preserve the value of your plan because your portfolio has more chance to grow when the stock markets hopefully recover. You still need to remember the income your investments produce is not guaranteed, it could increase, reduce or even stop for a period.

3. Consider keeping a cash buffer

This could help you continue taking the income you need without having to sell investments when markets are down.

If you don’t have a cash buffer now, it might be worth building one up over a period of time. This could be done by keeping some of the income your investments produce as cash or by selling investments when you feel their value is high. You might also choose to keep a buffer of cash savings outside of your pension (perhaps by saving some of the tax-free cash you received when you entered drawdown).

We suggest any drawdown investor should consider holding at least two years’ worth of planned income as cash. The amount you need to hold will depend on your circumstances, for example whether you have other sources of income to fall back on.

4. Review your investments

Volatility in the markets can create buying opportunities but it can also mean the value of your investments can fall rapidly if the markets turn against you.

The investments within your drawdown plan will fluctuate in value. It’s easy to log in to your drawdown account to view your investments and make a trade.  A portfolio with a diverse range of investments is likely to be better sheltered during market falls and provide more consistent performance.

If you are looking to buy or sell investments you might want to consider doing this in stages to spread the risk.

5. Get help when you need it

 

What you do with your pension is an important decision. Therefore, we strongly recommend you understand your options and check your chosen option is suitable for your circumstances. You should take appropriate advice or guidance if you are at all unsure.

This article is not personal advice. We offer a range of information to help you plan your own finances and personal advice if requested. Our financial advisers can provide one-off advice as well as ongoing management of your drawdown plan.

Help To Buy Roadshow: Telford

 

On Saturday 1st October, we will be attending the Help To Buy Roadshow in Telford. The roadshow will be a one-stop-shop for anyone looking to buy a new property using Help To Buy, with a wide array of house builders and housing associations in attendance. H2B Telford FB

We will be offering free, independent mortgage advice to guide you through the house buying process. The roadshow is free to attend, and open between 10am and 4pm, at the Holiday Inn, TF3 4EH.

Cash ISA v Stocks & Shares ISA

The type of ISA that’s right for you will usually depend on how long you want to invest for and what your attitude to investment risk is like.

A cash ISA is better suited to short term investments (less than 5 years) with little to no risk. Interest is added to your savings each year based on a fixed or tracker variable rate. Variable interest rate ISA’s usually offer instant access to your savings, while you could lose your interest if you withdraw the funds early from a fixed account.

A stocks & shares ISA is better suited to longer term investments of longer than 5 years. Savers have the choice of a wide range of investments such as funds, trusts, bonds and shares. The value of your ISA can both rise and fall depending on the performance of the investments. You can usually have access to your funds within 8-10 days.

The ISA limit for 2016/2017 is £15,240, and can be split between both types of ISA.

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Is a Stocks and Shares ISA right for you?

If you’re not sure that a Stocks and Shares ISA is the right investment for you then contact an Independent Financial Adviser at Warren & Co

Base Rate Drops to 0.25%

bank-englandFor the first time in 7 years the Bank of England has cut the base rate in an attempt to mitigate the impacts of Brexit on inflation and unemployment. The base rate now sits at a record 0.25%, down from 0.5%.

Anyone who currently has a fixed rate mortgage, will not be affected by the changes. However, those on rates which track the BoE base rate will see a reduction in their monthly repayments. The average variable rate borrower will see a reduction of £19.68 per month (based on a current rate of 2.86% on a mortgage of £150,000).

In regards to the lenders own Standard Variable Rates, the indication so far is that the lenders will not be cutting their rates to match the Bank of England.