Will pensions bounce back?

The current cost of living crisis has been detrimental in many different financial sectors. Pensions are no different. Have you had a look at your pension recently and been worried about its performance? If so, you could be wondering will pensions bounce back?

After all, the last thing you want is an underperforming pension when you hit retirement age. You want to ensure you have enough money saved up to live comfortably once you have left work behind.

As a result, there is likely one big question on your mind: Will pensions bounce back?

The up and down nature of pensions

Pensions go up and down. This is the nature of any type of investment, and pensions are no different in that regard. With that said, the COVID-19 pandemic was something that particularly hit the stock markets hard.

The problem is that, with a defined contribution pension, your monthly payments go into an investment fund. This investment fund is placed into the stock market. Due to this, if the stock market suffers a drop in value, the same happens to your pension savings.

It is important to remember, however, that pension funds will often suffer fluctuations over the short-to-mid terms. In fact, “booms and busts” can cause wild fluctuations – and the “busts” can be particularly worrying when viewed in an isolated way. Yet when you view your pension saving fund over the long term, it will often achieve growth.

You only have to look at the stock market before COVID-19 flipped the world upside down. Before 2020 arrived, the market experienced an extensive boom period. This boom period led to pension savings for UK residents growing at a much faster rate than average.

Waiting for the bounce back

Things may not seem great right now. However, patience can help to ease any worries you currently have about the health of your pension savings.

For a start, if you still have at least ten years to wait before you can access your pension, there’s no point in being fearful of your savings just yet. As mentioned, the stock market – even after historic crashes – will typically rebound over the following years. This means that in a decade from now, your pension pot will likely look a lot healthier than right now.

Of course, there is more to investing in a pension than the hope it goes up in value over time. One of the biggest plus points in its favour is the tax advantages up for grabs. While other investment products could drop and not offer you any positives, this is a different story with pension savings.

With a pension, there are various tax relief advantages. One of these is the ability to take up to 25% of your pension amount as a lump sum without needing to pay any tax on it. Furthermore, if you were to pass away before the age of 75, your beneficiaries would receive your pension tax-free.

Gain greater control with iSIPP

You don’t have to be dictated about which investments you make with your pension. By working with iSIPP, you gain full control over your pension savings. As well as being able to consolidate your savings into a single pension pot, you are given the freedom to select the investments you want to back.

Perhaps you want to play it safe with your pension? Maybe you’re open to backing a riskier – yet potentially more fruitful – investment path? Whatever appetite you have when it comes to investing, iSIPP gives you the power to match your pension with your exact wants and needs.

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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.