Today, the Bank of England announced it would be raising interest rates once again – to 2.25 percent. The central bank said: “At its meeting ending on September 21 2022, the MPC voted to increase Bank Rate by 0.5 percentage points, to 2.25 percent.
“Five members voted to raise Bank Rate by 0.5 percentage points, three members preferred to increase Bank Rate by 0.75 percentage points, to 2.5 percent, and one member preferred to increase Bank Rate by 0.25 percentage points, to two percent.”
But what does this decision mean for both pensioners and pension savers?
Alex Brown, financial adviser at Succession Wealth, warned it may be a hard time for individuals on a fixed income.
This is true of millions of pensioners who are relying on the state pension and their pension savings to get by.
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“It isn’t suitable for everyone, so ensure you do your research.”
However, there are some steps pensioners and pension savers could take given the interest rate hike.
The expert suggests consolidating old pension arrangements which may have become difficult to manage over time.
He added: “Consolidating your old pensions into one could help you cut down on management fees and give you a better picture of how your finances are looking.
“But before taking any action to switch pensions or investments, you should seek professional, regulated advice to ensure you fully understand all the implications.”
Becky O’Connor, Head of Pensions and Savings, interactive investor, suggested a base rate rise could be good news for older savers.
She said: “If the rise in the base rate is passed on to savers and has the effect of bringing down inflation, cash savings could start to look genuinely attractive again.
“This could be especially welcomed by older people, who often have more built up in savings and also often prefer the lower risk of cash compared to the stock market for their life savings.
“Although for as long as inflation remains higher, it’s important to remember that a real return is still likely to be negative and investing still offers the chance for inflation-beating returns over the long term.
“People taking out annuities have already begun to benefit from higher rates on these retirement income products and the rising interest rate environment is only going to improve the outlook.
“Cash might be starting to look interesting, but history shows the importance of equities for boosting long term investment growth and can make the difference between a modest and comfortable retirement.”