How to manage drawdown pensions during market volatility
By Cristian Angeloni, 3 Apr 20
Quilter gives five tips on how to limit coronavirus-induced damage for retirees
On top of not rushing to change asset allocation, reconsidering how much money to withdraw could safeguard future income as well.
“Those with smaller pots will need to think carefully about how best to protect the longevity of their retirement savings,” Greer added.
“For instance, someone with a £100,000 ($123,973, €113,761) pot might have set-up withdrawals of around 4%, or £4,000 per annum.
“But they now face a tough decision. If their pot has fallen in value to £75,000 then £4,000 represents a withdrawal rate of around 5.3% a year, which may not sound a lot but creates considerable uncertainty about how long their pot will last.
“To mitigate the risk of ruin, they could keep their withdrawal rate fixed at 4% to preserve the longevity of their pot, although this would see the income from their pension drop to £3,000 a year.
“This is a difficult decision and individuals need to decide whether they are willing to forego some income today in exchange for greater income security in the future.”
Tags: Covid-19 | Drawdown | Pension | Quilter | Volatility
