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Should I cash out my final salary pension during the COVID-19 market decline?

| UK| 23/03/2020 | 0

  • Workplace Pension

Question in full

With the market decline due to Covid 19 is now a good time to cash out my final salary pension for a higher CETV ratio?

Holly Mackay's Response

"With the market decline due to Covid 19 is now a good time to cash out my final salary pension for a higher CETV ratio?"

 

We checked in with pensions expert Tom McPhail on this one- final salary schemes are always tricky so it’s good to get some expert help.


Here’s what he had to say:

"In theory an investor could take advantage of inflated DB transfer values to switch out of their guaranteed scheme and to invest in a money purchase arrangement, buying in to shares at bargain basement values.

Current Gilt yields may drive up liability calculations so we could see generous transfer values emerging over the weeks to come. However we may also see trustees acting to cut back transfer values in response to the current market volatility. It is also worth noting final salary transfers take weeks or months to execute and who knows what the state of the world will be by the time it actually completes.

Right now many money purchase investors are facing the prospect of a cut to their retirement income as a result of falling asset values and suspended dividend payments. In this context, the security of a guaranteed final salary pension income looks pretty appealing so members should think long and hard before trying to cash in and jump into the market."

Hope his helps!

Holly

 

Stock Market Meltdown

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Just be aware...

We are not regulated to give personal financial advice - This isn’t full-fat regulated financial advice. Boring Money is a publisher and not regulated by the FCA. 

This means we can't help with specific personal circumstances or recommend specific investment products. It also basically means that if we say something daft, you have no recourse to come back and complain.

We’re only allowed to give you a steer or share an opinion or tell you the facts - That said, we promise that our answer to you is an independent unbiased perspective with no commercial gain to make. If you need regulated financial advice, you can find a good adviser via sites such as Unbiased & Vouchedfor.

Our Expert

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Holly Mackay

Founder and MD of Boring Money, Holly Mackay has been working in the investments space since 1998. She read Modern Languages at Oxford, with a special focus on Mediaeval French which was deeply interesting and arguably utterly useless.

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