Amid the market turmoil, the Bank of England was forced to step in with support aimed at helping pension funds. Fed Governor Andrew Bailey stepped in to offer a 13-day emergency bond-buying program that ended yesterday.
Pension savers eagerly await as the subsequent sell-off in UK government bonds, known as Gilts, has sparked a pension crisis.
As the state of the market remains unclear, anyone redeeming investments will have seen them drop in value recently, meaning less money for their future.
Jason Hollands, chief executive of investment platform Bestinvest, explained how retirees can avoid a “difficult” future.
He explained that the impact on pension savers would depend on what type of pension they have.
READ MORE: Attendance allowance: When to expect £150 DWP living allowance?
“If yesterday’s events help calm bond markets, then that will be good news for defined benefit pension schemes, which are facing serious liquidity problems and are counting on further BoE help.
“In any case, the holders of pensions supported by such schemes are in a very strong position – these were formerly known as ‘gilded’ pensions, after all.
“Retirement income from defined benefit schemes is predictable and secure, unlike income from defined contribution or private pensions.
“DB or terminal pay schemes need to be funded by employers and if a company goes bankrupt the Pension Protection Fund is there to provide a lifeline for members of the scheme.
DO NOT MISS
“In the worst case, insured persons of DB pensions who are not yet retired will have to accept 90 percent of the payment due in the event of their collapse.”
Mr. Holland explained that broader global market turmoil has hit asset prices and this is affecting the vast majority of us who hold defined contribution or self-invested personal pension funds and Stocks & Shares ISAs.
Most savers will have seen their pot fall in value this year, “which is worrying,” but savers should avoid panic, he said.
Savers should not be tempted to forgo their retirement because historically, asset prices have always recovered over the long term.
He added: “By continuing to contribute in market conditions like these, savers will absorb cheaper investments with recovery potential once the current economic clouds clear.”
Mr Holland suggested how Britons approaching retirement can avoid a difficult future when the markers fall
“For those approaching retirement in the near future, the outlook is more difficult as they anticipated accessing their retirement pot, and doing so now will likely mean redeeming investments that have recently lost value.
“If they can take steps to avoid this, their long-term finances for retirement should benefit.
“That could include cutting the cost of living as much as possible for a year or two so that the minimum amount has to be drawn from retirement savings.”
He also suggested drawing on other savings or assets rather than funds held in pension investments.
Finally, Brits may consider extending their working hours, perhaps on a part-time basis, to avoid drawing on their pensions while assets fall.
Prime Minister Liz Truss announced yesterday that Kwasi Kwarteng has been removed as Chancellor of the Exchequer after weeks of financial turmoil and political controversy since the September 23 mini-budget.
He was replaced by former Secretary of State Jeremy Hunt.
At the same time, another fiscal policy U-turn was announced: the government now intends to increase the main corporate tax rate to 25 percent instead of leaving it at 19 percent as previously announced.
This is the second major reversal in tax cuts after the government recently confirmed it would not go ahead with the plan to abolish the top 45p tax rate.