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 (Santander)

Abbey, Cahoot, Bradford & Bingley savings

Alliance & Leicester - separate authorisation

Cater Allen - separate authorisation

Bank of Ireland

Bank of Ireland, Post Office  

Barclays

Barclays Bank, Woolwich  

Citigroup

Citibank

Egg - separate authorisation

Co-operative Bank

Co-operative Bank, Smile 

HBOS

Bank of Scotland, Halifax, AA, Birmingham Midshires, Intelligent Finance, Saga

Sainsbury's Bank - separate authorisation

HSBC

HSBC, First Direct

M&S Money - separate authorisation 

Lloyds TSB

Lloyds TSB, Scottish Widows, C&G  

National Australia Bank

Yorkshire Bank, Clydesdale Bank 

Newcastle BS

Newcastle BS, BMW Savings  

RBS Group

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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