The cost-of-living crisis and your pension

The cost-of-living crisis is taking its toll on the UK population, forcing many households into poverty, and leaving plenty of others struggling to keep up with their monthly bills.

A result of rising inflation, stagnant wages, increasing energy bills, and a host of other factors have given rise to the crisis, an event that the Guardian is calling ‘the worst squeeze in decades.’

This has led many people to start worrying about their pensions and whether or not they’ll be able to keep contributing enough into their pots to benefit properly later on down the line.

What exactly does the cost-of-living crisis mean for your pension? It’s worth familiarising yourself with the current landscape, as this way, you may find it easier to navigate your retirement fund through the current choppy waters.

How inflation can affect your pension

Inflation is currently rising by 9% a year, which essentially means goods and services start becoming more expensive, which you may have already noticed through your energy and food bills.

When prices start rising, pension growth becomes increasingly challenging, just as it would for any kind of investment affected by the ebb and flow of the stock market. This is assuming your pension is invested in stocks and shares, which in most cases, it is.

As inflation rises, your pension needs to fight harder to keep up, and this depends on how well your assets perform and how much you continue to invest in the pension.

If your pension can’t outgrow the inflation rate, it will be worth less when the time comes to withdraw it, relative to the financial landscape at the time.

Less pension value may mean you experience a shortfall (the term used when your final pension value is less than you need it to be), leading to monetary struggles in your retirement.

Conversely, if your pension outperforms inflation, you’ll be left with a more valuable pot come withdrawal time.

Thankfully, there are ways in which you can combat rising inflation in terms of pension security, and it’s worth noting that super-high inflation doesn’t tend to last very long either.

Consolidate your pensions to keep fees low

A good way of maximising your pension and potentially defending your savings against inflation is through consolidation.

This is the practice of gathering together all your pensions in one place, making them easy to manage, and, if necessary, reinvest the assets.

Not only can this help you get your money centralised, but it can help keep fees low, allowing your savings to grow unhindered by various holding fees they might be subject to as a result of being split up.

iSIPP and money management

iSIPP handle pension consolidation, so if you need a helping hand getting your retirement fund under control in a way that best suits you, our team would love to support you.

Our decades of experience and technical expertise are ready to help you get the most out of your pension pot, and it’s all on your terms. You should have the power to choose how you invest your money, so it’s our goal to empower you to do just that.

Using our flexible, user-friendly platform, money management is made easy and accessible, no matter where you happen to be.

Sometimes, the ability to clearly see how your pension is performing can help you make the best decision on your future investments.

Don’t hesitate to reach out to us today; we’re here to help.

Conclusion

Coping with the cost-of-living crisis can be an extremely daunting and frightening prospect, but there is help out there, including government sites like moneyhelper.org.uk where you can get impartial guidance, so make sure you have a look around if you’re feeling overwhelmed.

It’s always worth revisiting your pension and thinking about how much you’ll need to enjoy a happy and fulfilling retirement, even if this means paying a little more into your savings earlier on.

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.