This is one of a series of questions posed by the FT writes Josephine Cumbo.
The FT writes in answer to the question “The pandemic has taken a heavy toll on stock market-based pension portfolios. The typical retirement fund lost around 15 per cent of value in March, when the virus hit, according to Moneyfacts, the financial information provider. While many funds may have since recovered these losses, those nearing retirement will face a dilemma over how to rebuild their funds if they are severely dented.
Mr Smith of Tilney says savers in this age group might want to consider raising their exposure to equities in their pension portfolios.
Mr Smith goes on to say “someone five years from their retirement date might want to consider retaining three years of expected income in cash within their pension and investing the remainder in more risky investments. It could be eight years before they needed to access the risk-based assets.”
In fact, its Mr Fear and Mr Anxiety asking the question. There is no action you can take that will answer rebuilding your pension. Mr Smith suggests, take more risk. That could go totally the wrong way. If an investor understood that is was part of the plan to accept knocks to a pension fund, then the question above would never arise. Investors who ask this question need help to understand what they are doing with their money and thinking more deeply about action that is needed or not needed.