How safe is my pension and will it be affected by economic turmoil?
Financial experts have warned Brits not to panic over their pensions but said there was ‘nothing short of becoming Prime Minister’ they could do to protect some savings.
The advice comes after The Bank of England had to step in and buy up massive amounts of debt to shore up prices ‘to save pensions’ last week.
Consumer finance expert Sue Hayward told people not to panic and urged savers to ‘check where their pension pots are’.
She told Metro.co.uk: ‘It’s easy to say don’t panic when it comes to pensions as it’s your life savings, but rushing into making a big decision and withdrawing your pension savings and draining your pension pot dry right now, could just mean you end up with a massive tax bill, as only the first 25% of your pension pot is tax free.
‘Beyond that you’ll pay tax at your usual rate’.
‘If you want to do something it’s worth checking where your pension savings are.
‘Many of us may them dotted around in different pots from previous jobs.
‘It is worth using a service like the Government’s Pension Tracing Service to find what you’ve got and how much they’re worth’.
Last week the UK’s central bank was forced to take steps to prevent a ‘material risk to UK financial stability’ after the Government announced un-costed plans to borrow billions of pounds to fund a raft of tax cuts last week.
The bank’s move, on a scale usually reserved for massive global financial crises, was reportedly taken because British pensions were in danger.
The move from Prime Minister Liz Truss has seen the Conservative Party lose huge amounts of support from voters, with the latest polls showing a 33-point lead for Labour.
Pension funds rely on the stability of government bonds to operate, and this have been decimated by the Government’s economic proposals on Friday.
Julian House, personal finance expert and managing director of My Favourite Voucher Codes said the Bank of England having to step in ‘sent the economy into a tailspin’ and it is out of people’s hands what happens with their pensions next.
But did say the move last week has saved people’s pensions.
He said other than running for Liz Truss’s job at Number 10, then what happens next with people’s pensions is out of their hands.
He told Metro.co.uk: ‘The events of the last week, including the rapid collapse of the pound, has sent the economy into a tailspin, but the swift and decisive action taken by the Bank of England means that everyone’s pensions should now be safe.
‘In short, the Government’s pledge to cut £45 billion pounds worth of taxes – an extraordinary amount of public finances – raised immediate scepticism among high-level investors.
‘In response, the bond markets and stock markets, both essential borrowing markets, tanked. Government bonds halved and pension funds were left with no option but to sell, causing panic among those approaching retirement.
‘However, the new commitment from the Bank of England has brought stability to the bond markets and stock markets, also bringing stability back to pension funds, and the pound has risen slightly.
‘Unfortunately, short of running for Prime Minister, there’s not much that people can do to protect their pension in a situation like this.
‘Instead, I would emphasise the importance of establishing smart saving habits now.
‘As we barrel towards a recession (some might argue that we’ve already entered one), maintaining our financial wellness is absolutely critical amid the cost-of-living crisis.
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‘HSBC recommends attempting to save approximately half your age’s worth of your income towards your pension, which is a great baseline.
‘For ease of mind, I would also recommend checking how much money you’re entitled to receive from the state pension. Pension reviews are completely free and will allow you to maximise the funds you end up with.
He also urged savers to speak to an independent financial advisor who can help organise your pension.
He said: ‘They can merge any dormant pensions with your current account, as well as ensure that your funds are being invested in the best place possible.
‘If you find yourself harbouring serious doubts about the future of pensions, there are alternatives that you can explore. Lifetime ISAs, for example, are intentionally designed to let you save money for your post-working life.
‘Conveniently, you’re still able to have a Lifetime ISA alongside a pension if you just want to explore the possibility right now.’
Yesterday the Prime Minister met with the Office of Budget Responsibility (OBR) to discuss just how bad the government’s books look.
The financial watchdog has now said there will be an update next week after crisis talks were held over the markets meltdown.
The Office for Budget Responsibility (OBR) spoke with PM Liz Truss and Chancellor Kwasi Kwarteng for just under an hour, in the emergency meeting
The pair met the OBR’s chair Richard Hughes, after the lack of independent figures on the markets meltdown.
The independent body said they discussed the ‘economic and fiscal outlook’ and pledged to provide Mr Kwarteng with the ‘first iteration’ of its forecasts next Friday (October 7).
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