Advisers will be telling those nearing retirement to keep a close eye on their pensions as global stocks tumble in the wake of new trade tariffs from the US.
But advisers have cautioned against long-term investors making knee-jerk decisions and said it was their job to “drown out the noise”.
President Trump imposed trade tariffs on Wednesday, in what he called ‘liberation day’.
From Saturday, a 10 per cent tariff will apply on almost all US imports, with some industries and countries given a higher rate, including a 20 per cent rate on the EU.
This morning (April 3) global stocks fell, while Futures tracking the S&P 500 and the Nasdaq were down 2.8 per cent and 3.3 per cent respectively.
Withdrawing during market downturns can deplete funds faster, so seeking advice on a flexible withdrawal strategy is crucial
Founder of Tailored Wealth, Georgia Taylor said: “Trump’s new tariffs have caused market volatility, impacting pension values. Long-term investors should stay invested and ride it out (ensuring they have a well diversified portfolio).
“But those near retirement must monitor their pensions closely. Withdrawing during market downturns can deplete funds faster, so seeking advice on a flexible withdrawal strategy is crucial. This highlights the growing need for financial planning to make pensions last longer.”
Tony Bentley, who runs Bentley Wealth Partners, said flexibility was key when planning for retirement – all the more important when global shocks occur.
He said: “These periods of uncertainty highlight the need for a more dynamic approach to retirement planning, specifically in how we think about drawing down on savings.
“Rather than adopting a ‘set and forget’ approach to withdrawals, retirees should consider incorporating a degree of flexibility by adjusting how much they take, within guardrails, based on market conditions.”
Dan Brent, of DFB Wealth, said while there would be some panic he expected this to be in the short term.
He said: “From a personal finance perspective, a drop in global markets of course causes some panic. The media will portray tumbling or plunging investments and it is the job of us financial planners to help our clients to drown out the noise.
“For those looking to retire soon, it might be that one holds off accessing pension benefits in the very short term, however this will pass, so enjoy the sunny weather, stick to your plan and don’t read the newspapers.”
While Finn Houlihan of AAF Financial Planning, said advisers will still be digesting the news and waiting to see the impacts of the announcement as the day goes on.
He said pension pots will have taken a hit, but said those closer to retirement are likely to have less exposure to equities.
It is important to not be emotional, not overreact and stick to the long term plan
“People with higher equity exposure will tend to be people further away from retirement,” he said.
“The clients it will impact have had a great run over the last 18 months and have been saving for 30 years. I would say it is a bit more nervy for those going into the market now, that is the biggest unknown.
“If you had a lump sum to invest today for a relatively short period of time we may suggest phasing into the market.”
Seán Standerwick, director of MLP Wealth, echoed the views of Houlihan and stressed clients should stick to the long term plan and not panic.
He said: “At this point there has been an emotional reaction to something that doesn’t seem great. However, this is why it is so important to plan retirement and have a portfolio that is looked after.
“We plan for such events when someone retires. And for those that cannot tolerate such drops they typically suit lower risk portfolios, which have allocations to other asset classes, including cash, or save havens that provide some protection in such a time.
“But we expect the unexpected (market drops and crashes, we just don’t know why or when), and this is very short term, we don’t really know the impact of these things yet longer term and whether some better agreements will be made.
“It is important to not be emotional, not overreact and stick to the long term plan.”
tara.o’connor@ft.com
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