Turbulence for pensioners as Kwarteng’s mini-Budget u-turn ‘plays havoc’ | Personal Finance | Finance
Chancellor Kwasi Kwarteng’s decision to abandon the abolition of the 45 percent income tax rate meant many were relieved after a week and a half of uncertainty. Following the announcement, the markets were driven to chaos, and the pound’s performance plummeted.
The Bank of England was even forced to step in with a bond-buying programme in efforts to stabilise the market.
Over the last 10 days, many pensioners and those planning for their retirement have been dealt a shock blow.
UK pension savers with a defined contribution pension pot have seen the value of this fall.
While long-term gilt yields have fallen back, they remain high, pushing down pension transfer value values.
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“However, the Bank’s actions will have given those schemes affected much-needed breathing space to assess what they need to do and put a plan in place.”
Savers have been urged not to make any knee-jerk decisions based on recent economic difficulty.
Even though people may be tempted to make changes, they could risk locking in losses which could be difficult to make up in the future.
There are also challenges for pensioners living abroad, as the plunging pound has “played havoc” with exchange rates.
The issue has been compounded by soaring inflation which has hit the pockets of expats hard.
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However, there are a few people who may have benefitted from the last 10 days.
These are individuals who are planning to purchase an annuity, which offers a guaranteed income for life or a set amount of time.
Soaring gilt yields have left these individuals in a better position than they were before.
According to Hargreaves Lansdown, a 65-year-old with £100,000 can now get an income of £6,994.
This is up from the same person getting around £4,989 a year ago.
Britons mulling this option have been encouraged to look at the different quotes available across the market, and assess their options carefully.
