The economic slowdown in China is more of a worry than Brexit for clients about to go into drawdown, according to Schroders’ head of retirement solutions, Sangita Chawla.
Ms Chawla said Brexit was causing some of the uncertainty in markets, but added it was "only a small factor to consider" for advisers’ clients who may be about to draw on their pension pot for income.
"We’re not going to really know the impact of Brexit until the deal on [March] 29. For example, interest rates could go up, sterling could go up or could go down, inflation could go up, or it might not happen," she explained.
"What we have seen is the UK property market be in a bit of limbo. We have also seen that the stock market is trading at a discount as well. That’s probably a sign to say some of that negativity has been written into the marketplace.
"But what we’re more concerned about is some of the other factors going on in the wider world."
Ms Chawla said: "We’re worried about the slowdown in China, we’re worried about increased trade tensions between the US and China, we’re worried about the end of quantitative easing and, the one we’re most worried about, is the slowdown of China and that’s because of China’s position in the supply chain."
China’s GDP growth slowed to 6.4 per cent in the fourth quarter of 2018 – the weakest quarterly growth figure since the financial crisis.
Some investors are concerned this is indicative of a longer term trend of slowing economic growth in China.
"What does that mean for retirees?" asked Ms Chawla. "I think it’s a very good time to look at what people are invested in and make sure that retirees are not exposed to any one single risk.
"So invest globally, invest in a wide range of asset classes, make sure they’re diversified and make sure the fund managers have the ability to change their risk profile depending on the market conditions."
Ms Chawla said most people were worried about significant market falls and seeing their savings erode away, rather than market volatility.
She added: "This problem of significant market falls can affect everybody but, of course, if you’re drawing money right now from your pension pot, what is the impact there?
"Based on our research of retirees what we hear from people is they’re most worried about their money running out.
"With longevity increasing, depending on when they started to draw money from their pension pot, they could be needing that income for the next 20 to 30 years.
"So sequencing risk – [the] timing of those losses - is absolutely key for them to consider."
eleanor.duncan@ft.com
