How did private pensions perform in 2022?

As we are still early in 2023, it is important to take stock of the previous year. This is applicable to understanding the current performance of your pension. This guide will look into how the cost-of-living crisis has affected private pensions and whether it remains a strong investment option.

How did private pensions perform in 2022?

Living costs are soaring. That cannot be avoided. Major issues, such as the war in Ukraine and the resulting international energy crisis, have caused a domino effect, which has led to prices remaining on an upward trajectory. On a day-to-day basis, this is felt most with energy and food bills skyrocketing.

As energy and food are among the major expenses for those living in retirement, this has left many worrying about their pension and how this will cover their future bills. This issue is magnified as the more the global stock and debt markets are negatively affected, the more it will impact our pensions. After all, pensions are tied into – and invested – in such markets.

Due to this, you could look at your pension over the previous year and see that it was down in value. The Office for National Statistics (ONS) revealed that between 21 March 2022 and 30 June 2022, private pension values dropped by 12%. The Bank of England is working to ensure this turmoil doesn’t continue for private pensions. The government has already given state pensions a boost to match inflation rates.

Help for pensioners

Fortunately, it is not all doom and gloom – in both the short and long term.

In terms of the short-term, pensioners can find help through Pension Credit. Those who claim Pension Credit could benefit from an income boost that goes as high as £3,000 per year. This can be vital for those that are struggling to cover their energy and food bills.

Furthermore, the Pension Credit scheme continues to help as living costs continue to rise. From April 2023, the amount that can be claimed will go up by over 10%.

Greater clarity with Pensions Dashboards

Due to the uncertainty that has been created in recent years, where investments have fluctuated significantly for obvious reasons, people are worried about the state of their pensions. One problem, however, is that it can be quite difficult to track the performance of different pension pots.

This is why Pensions Dashboards will be rolled out from April 2023. This tool is described as transforming the way savers access and understand their pension details. Through a single online hub, they can track various pensions and gain greater clarity on performance and the state of their investments.

Are pensions still a good investment choice?

This is the big question: Do pensions remain a good investment choice in these times of turmoil?

It is important to remember that pensions experience dips and rises. While they have experienced some dips in previous months, signs suggest they will grow in the coming years. This is what happened after the 2008 financial crisis, where sustained market growth continued until the coronavirus pandemic.

Of course, it’s not just about the value of pensions. They are also a great investment choice due to their tax-efficient nature. Did you know that out of the money you’ve built up in your pension plan, you can take up to 25% out as a tax-free lump sum? In addition, if you sadly passed away before the age of 75, your beneficiaries would receive your pension without any taxes applied.

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Disclaimer 

The content of this article is for general information purposes only and should not be construed as legal, financial or taxation advice. You should not rely on the information contained in this article as legal, financial or taxation advice. The content of this article is based on information currently available to us, and the current laws in force in the UK. The content does not take account of individual circumstances and may not reflect recent changes in the law since the date it was created. It is essential that detailed financial and tax advice should be sought in both jurisdictions and any legal advice, if required.

This notice cannot disclose all the risks associated with the products we make available to you. When making your own investment decisions it is important you understand that all investments can fall as well as rise in value and it is possible you may get back less than what you have paid in. You should also be satisfied that any investments you choose are suitable for you in the light of your circumstances and financial position. You should seek financial advice if you are not sure of what’s best for your situation.