How Will The Credit Crunch Affect Your Pension & Savings?Posted on: 27 October 2008 by Gareth Hargreaves
Independent Financial Adviser Peter McGahan explains.
Banks are still at risk during the current financial crisis but you can still make the most of your pension and savings.
I’m hoping to retire soon - how will the financial crisis affect my pension? Is my money safe in the bank? Would a nationalisation of banks be good for my savings?
The current financial situation has been caused by many factors most of which appears to have been blamed on the United States which of course apart from bordering on irresponsibility, is simply not true.
Sub-prime loans are one small factor but it was simply a feather that popped a bubble that had been inflated for three years. There will be a downturn for some time, 18 months, but what most forget is that most of the financial pricing already exists in the stock market.
Stock markets are very efficient and they have already looked at the potential scenario and priced that in although there is always the potential for this pain to become self serving.
On top of this many hedge funds have been forced to sell off lots of equities they wouldn’t have wanted to. This forced selling has priced the market down further still.
In the meantime those who are considering retiring soon may wish to defer taking the pension either by making it paid up - you just stop contributions - or considering a drawdown if you need short term cash.
A drawdown allows you to take your tax free cash lump sum whilst leaving the remaining capital invested allowing you to recoup some of your losses with any potential recovery in the stock market.
As for safety in the banks? Well that’s an interesting one.
If banks were nationalised it would be good for the safety of customers. You would have the safety of the government and a lack of swashbuckling bungling decisions made through greed.
There are obvious banks/building societies who are weak and those who are strong. Well capitalised institutions such as HSBC and the Nationwide I am sure will dine out on the fact they have run their businesses well, and so they should.
There will be further victims so be careful to ensure you have less than £50,000 each in an account and also that you don’t save with subsidiaries of your main bank.
Be sure to seek the advice of an Independent Financial adviser but also see below an example of banks and their subsidiaries:
Abbey, Cahoot, Bradford & Bingley savings
Alliance & Leicester - separate authorisation
Cater Allen - separate authorisation
Bank of Ireland
Bank of Ireland, Post Office
Barclays Bank, Woolwich
Egg - separate authorisation
Co-operative Bank, Smile
Bank of Scotland, Halifax, AA, Birmingham Midshires, Intelligent Finance, Saga
Sainsbury's Bank - separate authorisation
HSBC, First Direct
M&S Money - separate authorisation
Lloyds TSB, Scottish Widows, C&G
National Australia Bank
Yorkshire Bank, Clydesdale Bank
Newcastle BS, BMW Savings
Royal Bank of Scotland, Lombard Direct Line, Virgin Money (savings)
Coutts - separate authorisation
Tesco Personal Finance - separate authorisation
Natwest - separate authorisation
Ulsterbank - separate authorisation
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