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How to accumulate in the current climate

This article is part of
Guide to pensions after the pandemic

How to accumulate in the current climate

Individuals at different stages of their retirement saving journey will be thinking about how much they will have saved in their pensions pot.

And depending on whether they are at the start or further along, their approach will need to be different.

Maxine McIntyre head of financial strategies at WPS Advisory says if individuals are at the accumulation stage, they need to know what they are aiming for and they need to make all decisions in the context of their objective.

Ms McIntyre adds: “If you want to confuse, use words like accumulation, make it all about the investments and not the person and their loved ones.

“Working in a client-centred way will optimise the probability of consistent decisions, because it will stop the focus being on short-term fluctuations.

“To help this, it is important the individual understands any investment instruments upon which they rely to achieve their objectives and how they can react - that means right from outset.  

“If they do not understand, if they cannot evidence they understand, then they should not be holding those instruments.”

Early stage

For those in the earlier stages of their working life, there is a strong case for simply carrying on as before.  

Steve Webb partner at pensions consultant LCP says: “They may have enjoyed several years of strong growth and if they are in a workplace pension with a substantial employer contribution and a top-up from tax relief, they have still enjoyed a fantastic return compared with most other potential uses for their money. 

“Where people are keen to try to rebuild their pension pot more quickly, a key tip is to make sure they are taking full advantage of any 'employer match' on their workplace pension contributions.”

Steven Cameron, pensions director at Aegon adds: “For those saving in pensions who are many years off retirement, even large swings in values today may make no difference to what they ultimately have once they retire. 

“In fact, at times when markets have fallen, a regular contribution can buy more units which in the longer term could increase the value of pension savings. This is why in such circumstances, it makes sense to keep paying in as usual.”

For those on workplace schemes, the experts say it should create some baseline advantages, in that the value of the collective should create economies of scale and leave more of the customer’ in their own pocket, albeit in the pension scheme, should, mathematically and in theory, produce better outcomes.

“However, very often individuals are in the scheme without really understanding its true long-term value and they do not get access to advice,” Ms McIntyre points out.

“What they get is education and guidance, which has value, but it does not, in our experience, always build the bridge between making a decision to be in a scheme, auto-enrolled or not, and having a clear plan.”