Gold gets a glowing review The price of gold has rocketed this year, fueled by geopolitical tensions, stock-market volatility and demand from investors seeking a safe haven for their money amid the turmoil. Returns have been impressive for investors. With gold prices hitting a record high in April, this equates to around a 40% gain in just 12 months. While it’s easy to be dazzled by these numbers, investors should remember that there have been long periods in recent decades where returns were broadly flat, offering little reward for longterm holders. EFFECTS OF CURRENCY CONVERSION Gold is priced in US dollars, which adds a currency dimension for UK investors. If the dollar weakens against sterling, the value of gold holdings can be depressed when converted back into pounds, even if the gold price rises in dollar terms. For investors gold may play a role as a diversified asset, but only as part of a broader, balanced portfolio. Credit:oneinchpunch/Shutterstock.com 7 RETIREMENT Understanding retirement income needs One of the most complex financial decisions people will make is around income in retirement. But there is no simple, total solution. INVESTMENT Today’s retirees typically have a mix of workplace and private pensions plus savings. These might be defined benefit schemes that pay a guaranteed income linked to earnings or defined contribution plans acting effectively as investment funds, where retirees can choose to draw down a regular income or buy an annuity for a guaranteed lifetime income. Choosing the right approach is far from straightforward. The most suitable option will depend on factors such as the value of your pension pots, types of schemes held, other financial assets, relationship status as well as your health and attitude to risk. SPENDING PATTERNS Recent research from the University of Bath based on spending patterns going back decades found there is no ‘one-sizefits-all’ solution. Some retirees, particularly homeowners, spend more in the early years of retirement, but this falls away as they age. They would benefit from flexible options such as drawdown. Others have steadier, often lower spending needs, and may benefit from a guaranteed income solution with some inflation protection. Understanding the implications of these differences underlines the importance of taking advice, especially as some decisions, such as buying an annuity, are irreversible. Retirement can last for 25 years or more and needs will change. Regular advice MOTs may also prove useful, particularly as many retirees now keep funds invested for longer. If markets shift, living costs rise, or personal circumstances change, your strategy may need to adapt. Reviews are an opportunity to discuss investment strategy and consider future annuity purchases, as well as look at wider planning issues like estate planning, setting up lasting powers of attorney or eligibility for state benefits. ✣ The value of your investment and the income from it can fall as well as rise and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Occupational pension schemes are regulated by The Pensions Regulator. Credit: Song_about_summer/Shutterstock.com Credit:Watchara Ritjan /Shutterstock.co Credit: MandriaPix/Shutterstock.com
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