The pension climate has been a challenging one recently, with a number of events impacting savers. It is a financially uncertain time, and many will be hoping to mitigate negative impacts on their retirement and cash.
One such impact is inflation, which has been steadily soaring in recent months.
Inflation erodes the value of a person’s money over time, which can create difficulties.
This is because it may leave Britons with less purchasing power in later life, potentially impacting specific goals they had in mind.
While investments are typically intended to grow money over time, pensions are not immune from the impacts of inflation.
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Experts are now warning this “toxic mix” could be devastating for retirees.
It may leave Britons at risk of running out of retirement cash as a result.
Tom Selby at AJ Bell, told The Telegraph: “It can be very problematic if a saver makes a large withdrawal in the early years of drawdown just as investments fall in value.
“Even higher-than-average returns in the following years would not make up the lost ground.”
Rebecca O’Connor, Head of Pensions and Savings at interactive investor, stated annuity rates may become more attractive as interest rates rise.
However, she added, this is not to say drawdown is not still a favourable option.
With these factors to consider, Britons may wish to think very carefully before withdrawing money from their pension in the current climate.
Financially planning may be necessary in other aspects of life to ensure money is managed in the best way possible.
Some individuals will wish to cut back on other spending to ensure their pension is not impacted.
As with all investments, it is important Britons review their options carefully.
People may also consider taking financial advice tailored for their specific circumstances.
The value of investments can go up as well as down, and a person’s approach will depend on their attitude to risk.
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