Gilt Yields sink to record low - What does it mean for Pension Savers?

01 July 2016
 

Following the UK’s shock vote leave the EU and clear signals by the Governor of the Bank of England yesterday that more monetary easing is in store, 10-year gilt yields have fallen to a record low level today. David Smith, Director of Financial Planning at Tilney considers how this will affect savers approaching retirement.

Smith comments: “While so far the stock market has defied some of the most apocalyptic predictions made during the referendum campaign, there has nevertheless been a flight to perceived safe havens, including UK Gilts. As prices have nudged higher, yields have crumpled. With a very clear signal that further interest rate cuts are on the cards, and possibly another round of Quantitative Easing (QE), UK Gilt yields are now at an all-time low.

“As pension annuities are directly linked to gilt yields, the amount of income a retiree can secure from their pension has already fallen significantly and a further QE stimulus will only serve to compound the problem. Final salary pension schemes have too felt the wrath in the wake of Brexit with funding deficits widening on a daily basis, increasing the risk of insolvency for employers and wind up of the scheme itself. Cash savers are likely to be hit with lower interest rates for longer and investors who are looking for a safe haven are presented with high costs and low yields.”

So what can be done?
“Savers must not panic. Those approaching retirement in the near term should perhaps consider delaying for a period or perhaps looking to alternative forms of retirement instead of an annuity, for example, taking withdrawals via flexible drawdown or buying a third-way annuity that can provide a fixed income for a short term, ultimately delaying the decision to conventionally annuitise.

To discuss this or any other financial planning topic please contact David Smith on 0191 269 9970/ david.smith@tilney.co.uk

-ENDS-

Important information

The value of investments, and the income derived from them, can go down as well as up and you can get back less than you originally invested.  This press release is not advice to invest or to use our services. If you are in doubt as to the suitability of an investment please contact one of our advisers.

Once set up, an annuity cannot normally be changed or cancelled, therefore it is important to consider all of your options. Before accessing your pension it is important to consider all of your options, if you are unsure of these you should seek professional financial advice or visit Pensionwise.gov.uk

Press contacts:

Gillian Kyle
0203 818 6846 / 07989 650 604
gillian.kyle@tilneybestinvest.co.uk

About Tilney

Tilney is a leading investment and financial planning firm that builds on a heritage of more than 150 years. The Tilney Group operates under the Tilney brand for Investment Management and Financial Planning and Bestinvest for execution-only investing. We look after more than £22 billion of assets on our clients’ behalf and pride ourselves on offering the very highest levels of professional client service with transparent, competitive pricing across our entire range of solutions.

We offer a range of services for clients whether they would like to have their investments managed by us, require the support of a highly qualified adviser, prefer to make their own investment decisions or want to take more than one approach. We also have a nationwide team of expert financial planners to help clients with all aspects of financial planning, including retirement planning.

We have won numerous awards including Best Fund Platform and Best SIPP Provider at the 2017 City of London Wealth Management Awards; Investment Award – Cautious category in the Private Asset Management Awards; and Stockbroker of the Year, Execution-only Stockbroker of the Year and Self-select ISA Provider of the Year 2015, as voted by readers of the Financial Times and Investors Chronicle. We are pleased that our greatest source of new business is personal referrals from existing clients.

Headquartered in Mayfair, London, Tilney Group employs over 1,000 staff across our network of offices, giving us full UK coverage, and we combine our award-winning research and expertise to provide a personalised service to clients whatever their investment needs.