Recent months have seen economic uncertainty with rising prices and interest rates meaning the cost of living is going up. At the same time the war in the Ukraine, the effect of Covid on the economy and political events have all affected investment markets causing falls in bond markets as well as share markets during September and October 2022. Consequently, your Investment Account may recently have fallen in value.
The key message is don't panic. Pension savings are long-term investments. Whilst investment markets can go up and down in the short term, the aim for the growth phase of the Lifestyle investment strategies is for your Investment Account to grow over the long term (although performance is not guaranteed).
Do you need to do anything?
If you're closer to retirement (5 years or less) and in a Lifestyle strategy, you should check which Lifestyle strategy your Investment Account is invested in and that it matches your plans for the future.
If your Investment Account is invested in the Drawdown Lifestyle, this is designed for members who plan to take a flexible income at retirement, using Income drawdown (meaning that you are expecting to continue to invest your savings and withdraw them as you need in retirement). Your Investment Account is automatically switched so that 75% of its value is in the AZ Diversified Fund (which invests in equities, bonds, and property) with the remaining 25% invested in cash at retirement.
If your Investment Account is invested in the Annuity Lifestyle, this is designed for members who plan to buy an annuity (a regular income for life) from an insurance company when they retire. Your Account will have been automatically switched to the AZ Annuity Fund which invests in bonds. The aim of this strategy is to match the cost of buying an annuity; some of the factors that have meant the value of bonds have fallen have also lowered the cost of buying an annuity, meaning the annuity income you can purchase with your Investment Account is broadly protected.
If you're invested in a Self-select fund, your Investment Account is invested in line with your own investment preferences. You should review how your Investment Account is invested and whether the investment risk is right for you and in line with your retirement plans.
Should you change your retirement plans?
If you are close to your planned retirement and your Investment Account has been significantly affected by falls, you should take stock, and decide whether this is the right time for you to retire. Talking to an independent financial adviser about your overall finances might help you understand your options more clearly.
Even if you are not close to retirement, you should check whether your Target Retirement Age is in line with your retirement plans. Don't forget your State Pension Age is likely to be 66, 67 or even 68! You can check what your State Pension Age is here: https://www.gov.uk/state-pension-age
Who can give you advice if you are not sure what to do?
If you're not sure what to do with your Investment Account or are worried by investment market volatility, you can speak to an independent financial adviser about your options. They will give you advice about your options at retirement or before.
You can find details of Financial Conduct Authority regulated advisers at: https://www.moneyhelper.org.uk/en/pensions-and-retirement/taking-your-pension/find-a-retirement-adviser
If you want to see the value of your Investment Account and which funds it's invested in you can log on to My AZ Pension. You can access an Investment Guide and fund factsheets in the Library.