How to protect your pension from rising inflation

How to protect your pension from rising inflation

The rate of inflation has reached record highs, and much of the UK’s population is struggling to cope with the cost-of-living crisis as a result.

As inflation begins to whittle away at the value of people’s savings, many savers and would-be retirees are looking for ways to lessen the overall impact on their retirement funds.

If this is starting to sound a little too familiar, then there’s no need to panic. There are measures you can explore to protect your money for the future. You might want to take a look at the list of hints below for some quality advice.

1. Wait it out

If you have the time, then it may be worth waiting out the worst of the inflation storm. Markets tend to recover quickly, inflation rates will fall, and your pension will have more value as a result.

Plus, delaying your retirement can enable you to continue contributing to your pot and growing your savings even further.

Using your pension pot to take income in the middle of a falling market can deplete your savings incredibly quickly, partly because of how the high rate of inflation affects the stock markets in which your pension is invested.

2. Consider where your pension is invested

Many people have never given their pension much thought, or rather, where it is that their pension is invested.

If you feel like you want a little more input and you’d rather manage your pension investments more closely, you could always consider consolidating your pensions with iSIPP.

We can help you consolidate (combine) your pensions into one easily manageable online location, and you can access it from anywhere in the world at any time.

It’s your money, and we believe you should have control over it, so we’ve created the ideal space for you to choose what to do with your pension.

Whether you want to invest it in ESG (environmental, social, governance) funds, ready-made funds, or a personalised mix, we can help you make the perfect choice. Plus we are FCA regulated, so you can rest assured your pensions are in safe hands.

Investments are well-equipped to deal with inflation, especially pension funds, so it’s worth thinking about the benefits of manually choosing and managing the fund of your choice.

3. Keep contributing

Rising inflation may cause some people to stop contributing to their pension, electing instead to take more income to help cope with the day-to-day or choosing to save their money as cash.

Pensions are likely going to outperform cash savings in any case, and the more money you can contribute to your pot, the more you can maximise the benefits of the 25% tax relief top-up on pension contributions offered by the government. If you’re in the highest tax bracket, you may be able to manually claim more on top of this, which you can do through the self-assessment tax return form on the government’s website.

4. Consult your financial advisor

An expert financial advisor will likely be able to offer you the best advice moving forward, so if you’re worried about the effects of inflation, don’t hesitate to reach out to a professional.

5. If you’re already withdrawing a pension

If you have a defined contribution pension and are already withdrawing from it, it might be worth considering taking less money to leave the rest invested. This can help you retain more of the value of your pot in a volatile market as the fund manager will oversee the performance of the investment, making adjustments for inflation as long as it remains invested.

If you have a defined benefit pension, you don’t need to worry about inflation, as it will adjust for this automatically. It’s important to note, however, that it will decrease in value should inflation do the same.

Revisiting your financial plan

Ultimately, it’s always worth revisiting your finances from time to time. As the financial landscape changes, so too will the money management style that best suits your needs.




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.


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