Pension savers urged to take action amid ‘volatile’ investment market

With prices for everyday essentials continuing to rise and inflation remaining at 8.7 percent in the latest figures, pension savers may wonder what this means for their retirement funds.

Rising prices can mean the value of certain investments go up but high inflation also means soaring prices for energy bills and food, which hits the purchasing power of pension income.

Clare Moffat, pensions expert at Royal London, spoke to Express.co.uk about what the current trends mean for pension investments and what action people need to take.

She said: “The volatility in the economy and investment markets is understandably having an impact on pension fund values. However, to what degree will depend on which funds an individual is invested in.

“For example, anyone who is invested in UK equity funds which are heavily weighted to FTSE100 assets will have seen their fund value impacted – more than someone who is invested in less risky assets, like cash funds.

“It is important to remember that pensions are a long-term investment and that people do not make knee-jerk reactions to short-term investment performance.”

She urged Britons saving up for their retirement to get to grips with how their investments work.

She explained: “It is also important to understand what you are invested in and, on a regular basis, check if they are on track.

“For those closer to retirement it is even more critical to understand how risky your investments are.

“The closer people get to retirement there is a need to consider more balanced, less risky assets to help protect themselves from large market swings.”

Since April, many household bills have gone up squeezing the budgets of Britons of all ages. Energy and water bills increased, as well as council tax and mobile and broadband charges.

‌However, Ms Moffat warned against a person slashing their pension contributions amid the ongoing pressures of the cost of living.

She pointed to figures indicating that 12 million people, or 38 percent of the working popular, are not saving enough for their retirement.

She said: “While pausing or reducing contributions now may solve the immediate challenges, there is a concern that they are increasing the risk of facing a cost of living crisis in later life.

“Encouragingly, Royal London’s cost of living research shows that the number of people stopping or reducing their pension contributions is still relatively low.

“It’s worth asking your employer if they offer salary exchange, which means your contribution will benefit from a national insurance saving.

“In addition, it is also worth remembering that you don’t pay the whole amount of the employee pension contribution as you benefit from tax relief from the government.”

Thanks to the tax relief rules, for every £80 a basic rate taxpayer puts into their pensions, the Government adds another £20.

She also encouraged people to check how much state pension they are on track to receive, which can be done using the state pension forecast tool on the Government website.

The full basic state pension is currently £156.20 a week while the full new state pension is £203.85 a week‌.

A person typically needs 30 years of National Insurance contributions to get the full basic state pension and 35 years of contributions to get the full new state pension.

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