Is The UK Heading For A Recession? How to Prepare Your UK Pension for UK Recession

Every day and everywhere you read, regardless of where it is, you will always get caught up with the UK recession. It is the headliner in almost every media around the UK, and it’s the current short-term noise for now. With the UK recession, you might wonder how my Final Salary pension or other UK pensions will be.

This post will discuss the UK recession and what to do with your UK pension. Dominic James Murray, our CEO and Independent Financial Advisor, explains briefly in one of our YouTube videos about the UK recession, what will happen with your UK pension, and preparing your pension in the event of a UK recession.

Why You Should Ignore The Short-Term Noise

Right now, no matter what you read or where you go online, the UK recession will always be the headline. As a UK resident, you should be ignoring this short-term noise. Why? Let’s take a look at an example. With Covid-19 still massively spreading in many places, you can see that Covid-19 is just not in the media. No one cares about it. Covid-19 is boring and doesn’t sell headlines. It doesn’t sell advertising space, either.

However, when you have something fearful such as a recession, people will obviously buy into it and worry about it. If you have any concerns about your current UK pension at a time like this, don’t just read the news. It would be best if you talked to a Pension Transfer Specialist to get full knowledge of your pension and what to do best with it. Having a conversation with your IFA doesn’t mean you start a pension transfer, but talking to someone who understands the UK pension transfer industry day in and day out can help you to understand your situation better.

Don’t try to stay home and make all decisions on your own or even try to understand what’s happening in the market. You’ll confuse yourself and end up making a hurried decision.

What Most People Think Wrongly About the UK Recession

Most people attempt to time the market by changing their entire portfolio before the recession. Technically, this means before a recession, you cash in the entirety of your portfolio and let the recession happen, and then you move back to equities again after the recession has stopped. When the markets are at the bottom, you will do fantastic because you will be selling high and buying low.

However, that is what people have been trying to do for the past 50 years. Only a few asset managers have been able to do that over a consistent period of 5, 10, 15, and 20 years. Some of the asset managers we work with have managed to do that over the course of time, but the majority of active managers have actually underperformed in the market.

As such, it isn’t easy trying to time the market. When the market drops to the low point where you should be buying in, typically speaking, from what happened with our clients, they haven’t got the stomach for it. When we tell people that it is a good time to reallocate their portfolio, people don’t do it because they’re scared. What they like to see is the market bump up. Then, when the market goes up by 10%, they suddenly feel confident and want to move ahead, whereas they have already lost 10% of growth. Again, timing the market is very difficult and is almost impossible as you are up against people who have all the inside information on Wall Street.

Hence, why try to outsmart the people who are already trying to time the market for a living with your pension pot? It’s far better to keep it simple and invest in long-term equity markets in a risk profile that is correct for yourself, and in 5-20 years, we believe equity markets will continue to grow firmly in the future as we’ve seen equity markets grow in the past.

Why You Should Not Be Panicking

It would help if you did not panic about your UK pension during a period of recession. You might actually get quite excited during periods of recession because, obviously, when we do see a massive dip in the market, it can potentially be a good time to buy into the market. However, it is important to remember that pension management is always about long-term stuff. We’re not interested in what happens in the course of months or one year. We’re interested in what happens over the course of the next 20 years.

Focus on the Suitability of Your Risk Profile

In a time of recession, you might be wondering if you should stick with your Final Salary pension and current CETV value. It is essential to remember that transferring out of your Final Salary Pension scheme is not about the value of your CETV. The only thing that you should be focusing on is the suitability of the advice. Is it suitable for you to transfer to the Final Salary Pension scheme in the first place? That’s the hurdle you need to cross before then you decide to transfer or not.

Let Our IFA Provide You With a Clear Understanding of Your UK Pension During the UK Recession

Rather than following what the media says, it will never hurt you to always focus on long-term growth. In the last 20 years, we have seen the equity markets grow, outperforming cash equity markets and the Final Salary Pension schemes as well. Even if you have a 3-4% indexation on your DB scheme, the equity market is typically growing at 7-9% over the course of the past 30-40 years.

The point is, forget the noise, stop looking at the media, stop checking your portfolio on a daily basis, and let the markets do their thing over the course of the next 40 years. Don’t let the short noise bother your mind. Keep focusing on the long-term goal.

Preparing your UK pension by yourself for the UK recession is extremely dangerous. You should always be talking to your IFA or if you don’t have one, find the most reputable IFA that you are comfortable working with. Obviously, they will be telling you to keep a long-term view and not try to go in and out of the market or time the market. 

Put your fears aside, and let one of our IFAs help you to get through this recession period. If you want to talk more about preparing your UK pension for the UK recession, feel free to hit the button below to book a date and time for a free initial consultation with one of our IFAs. Our IFAs will provide you with comprehensive advice that is suitable for your situation as well as your risk profile.

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