Unlock Your Pension Cash To Avoid The Brexit Crash
As markets tumble post-Brexit, taking personal control of your pension fund could help you avert financial catastrophe
Some people might have seen it coming, and others might have been surprised, but most people will find the economic situation after the Brexit referendum a little worrying. Sterling has plunged. The stock market has fallen, and then recovered slightly, but things remain in a state of flux. At least six open-ended property funds have recently suspended trading as they have run low on cash reserves to pay out for redemptions.
A Period Of Great Uncertainty
If your pension fund is invested in the stock market, you are probably concerned about what the future might hold. At times like this it’s difficult to know what to do. This is a period of great uncertainty. Nobody knows when (or even if) article 50 will be activated, starting the two-year countdown for the UK to leave the EU. Nobody knows how the exit negotiations will go during this two-year period.
As for future trade agreements with the EU, negotiations on these cannot even begin until after Britain is out of the EU. And don’t forget that any future agreement between an “independent” Britain and the EU must have the unanimous agreement of every single country within the EU.
Beware Confident Pronouncements
No wonder that even finance professionals are uncertain what to do in the current climate. Of course, many of them will still make confident pronouncements about how you should invest your money. Their advice may sound convincing to you, but of course that’s to be expected. Their job is to sell you a product, and may be to your benefit, but it ain’t necessarily so.
For many people, the sensible course of action will be to sit tight, especially if retirement is still some time away. Put simply, a drop in share prices means that equities can be acquired by pension funds at a discount, and there is a good chance that prices will recover in the long term.
Consider Alternative Investments
Don’t overlook the possibility of using the current situation to maximise the potential of your pension investment. In the immediate post-Brexit period, the stock market is a volatile and risky place, and you might think that other investments are safer, at least in the short term. But savvy investors of a certain age are choosing to cash in pension funds to release capital for alternative investments.
Cash Funds vs Bricks & Mortar
In order to protect your money against stock market volatility, one option is to put it into a cash fund, but this is something you should approach with caution. These are promoted as investing in cash, and therefore low risk. However, rather than being simply placed in deposit, the money in many of these funds is heavily invested complicated financial instruments tied up with mortgage and business debt.
This is the sort of thing that led to the credit crunch in 2008, and a lot of people who had put their money into cash funds were badly affected at the time. Cash might be a relatively safe bet at this time, but a cash fund may not be, so do your own research and take proper advice before you invest.
With the fall in property prices in the post-Brexit period, another attractive investment is good old bricks and mortar. Given time there’s a good chance of recovery, and until then you could make regular income from AirBnB or Spacehop.
Remember – You Have Options
If retirement is close, your pension prospects are likely to be severely affected by the post-Brexit market crash. But you do have options. Whatever you choose to do with your retirement fund, the important thing is to do your homework before selling your pension. Be aware of the risks as well as the potential benefits, and make sure you get proper advice before you act.