Risk stock market crash
By James Salmon for the Daily Mail Updated: The savings of more than one in three workers with a company pension could be at risk of last-minute drops in the stock market as they approach retirement, Money Mail can reveal. Figures show that up to 1. Having saved their whole life, these workers could face a retirement on an income worse than they had planned.
How to Prepare Yourself for a Market Crash | Investopedia
The importance of this was highlighted in the recent stock market volatility. Worst affected will be those approaching retirement who have not opted to protect their savings by slowly switching out of the market into cash and bonds.
Those most exposed will have seen their past five years of contributions to their pension wiped out, according to PricewaterhouseCoopers. The losses from the stock market have been compounded by falls in the amount of income those retiring soon will get from their pension pot. Annuity rates — which determine the income that retirees get from a pension — have tumbled as a result of the stockmarket turmoil. Billy Burrows, founder of annuity broker William Burrows Annuities, says: There are huge numbers of people in work pensions and personal pensions who are not protected from these last-minute falls and who will be locked into a poor pension rate.
Essentially, this means pension pots are gradually moved out of the stock market and in to less volatile assets such as bonds.
Annuity rates are linked to corporate bonds and gilts, bonds or IOUs issued by the UK Government or companies to raise money. Worries about the debt crisis in the eurozone and the U. This has driven up the price of gilts and pushed down the yield — the annual interest rate paid to investors — to an all-time low of 2. All insurers have cut their annuity rates — which determine the income paid from your pension pot — over the past few weeks.
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