Coronavirus crash now 'biggest threat to retirement plans'

Stock market falls as investors fret about the economic impact of Covid-19 have left many people in the UK worried about their pension pots, research shows.

A third of people fear an economic crash could derail their retirement plans, according to new research from Sanlam UK. Sharp stock market falls this year as investors fret about the economic impact of Covid-19 have left many people worried about their pension pots.

In a survey of more than 2,000 UK adults, the group found there had been a 45% year-on-year increase in the number of people who now see a serious downturn as the biggest threat to their retirement goals. Previously, people had been most worried about illness, but this is now the biggest concern for just 14% of people, down from 21% in the 2019 survey.

- Recession-proofing a portfolio: shares and funds that fit the bill
- What does coronavirus mean for your retirement plans?

Unsurprisingly, those closest to or in retirement, the age 55-64 age group, were most worried. However, women were more likely to point to their struggle to save every month as the biggest barrier to saving for retirement. This was a problem for 28% of women compared to 22% of men.

The survey also noted a slump in people’s confidence that they will achieve the savings they need to retire when they want to. The proportion of people saying they are confident they can meet their goals has fallen from 56% last year to 48% today.    

Fear of further market falls was also highlighted in research by AJ Bell. The survey found that half of investors expect further turbulence, and also that half believe the FTSE 100 will end the year below its current level, around 5900.

Only one in eight people think markets will have recovered to their pre-pandemic levels within the next 12 months. However, 40% of those surveyed by AJ Bell believe we have seen the worst of the market falls.

“The outbreak of the coronavirus and the subsequent public lockdown has shaken the UK economy to its core and our survey reveals the very real long-term financial concerns people now face,” says John White, chief executive of Sanlam’s wealth division.

“The sharp market falls we witnessed in March have alerted people to the damage an economic crash could wreak on pension pots and, understandably, more people now fear that a wider, continued downturn could derail plans to retire when they want to. It is unnerving to watch the value of hard-earned savings take such a hit, particularly if this pot is not as large as it perhaps could be to sustain the kind of lifestyle many may seek once they give up work.” He urges people to start saving early, regularly, and to consider taking professional financial advice.

“If this crisis has proven anything, it is that it pays to be prepared. Steady savings are key to ensuring people can leave work when they want to and enjoy a comfortable retirement,” he adds.

- Seven ways to use stock market falls to benefit your finances

There are various steps that investors concerned about further market falls can take to protect their portfolios, including reducing their exposure to equities, making use of capital protection-focused funds and trusts, and ensuring they are well diversified in terms of range of underlying companies as well as asset classes.

- Gold is top-performing asset class as Covid-19 and inflation fears prevail