Coronavirus And Your Financial Health

Three tips for what you can do now to look after your financial future.

The impact of the pandemic has been widespread. People, businesses, and economies have all been hard hit. The road to recovery is likely to be bumpy for all. But what does this mean for our pensions and investments? What can we do right now to safeguard our financial future?

Firstly, keep calm and take the long view

Remind yourself of your goals. Why are you saving and what is it for? When are you likely to need to draw an income or utilise the funds? For those with time on their side, history shows that markets typically rebound, given time. Although there may be further bumps ahead, cashing in your investments during a downturn will cement losses on those that have fallen without giving them time to recover. Also, if you have been making regular contributions to your investments try to continue doing so to benefit from compound interest, pound-cost averaging, and long-term returns. These factors will gradually help to get your finances back on track and provide some protection from the ebbs and flows of the markets over time.

Secondly, consider whether your nest egg is diversified enough

A mix of investments such as cash, bonds, and equities, typically offer the best protection against the downs and ups of the market. By also looking at industrial sectors and geographical regions, you can further diversify your risk and returns. Positioning your nest egg to benefit from a range of investment returns can help it withstand shocks. For example, you could add funds that are designed to minimise downside risk such as absolute return funds. Or increase your exposure to corporate bonds and gilts. If you are unsure about doing this yourself, an adviser can help you build a portfolio with a broad spread of investments to suit your appetite for risk. Many advisers also have ready-made portfolios suitable for a range of risk profiles that can help you get started.

Thirdly, make the most of your tax allowances

You can place your investments in tax-efficient wrappers such as ISAs and personal pensions to benefit from tax-free income and gains, which could build a substantial investment pot over time. Personal pensions are particularly effective at growing a long-term nest egg as you can benefit from tax relief at your marginal rate. This can mean an extra 20-45% boost to your ring-fenced pension savings.

If you still feel that you are not on track you can seek help If you are unsure about your next steps and would like some expert help, an adviser specialising in long-term saving can help you plan ahead. Understanding your appetite for risk and your target retirement date, can enable you to make the best decisions today to safeguard your financial future.