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Fear and uncertainty; Is it worth investing into pension funds?

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Many external factors have impacted on the global economy to unprecedented levels putting pressure on households. At the time of writing, interest rates have just increased to 1% in a bid to curb inflation as the UK economy shrinks.

Should I be worried about the effect of the current economic crisis on pension schemes?

Many people will be put off by the economic downturn, worrying that money put into funds will just be lost with little return on investment with rising inflation and the subsequent hikes in interest rates. However, the crisis has not diminished the importance of private pension provision in a well-balanced pension system. Private pensions are necessary to diversify the sources of income at retirement and, as such, they complement state pensions.

The most important aspect to remember though is that pensions are long-term investments, and -as such, short term economic downturns should not be paid too much attention to. Most pension schemes are designed to be flexible depending on the amount of time left until retirement with the amount of risk altered accordingly.

Is retirement planning taking a back seat?

The OBR has forecasted that household real disposable income per person is expected to contract at its fastest pace for at least the last 65 years, shrinking by more than 2 per cent, which for many will put investments, savings and pensions at the bottom of the list for expenditure.

The current situation of rising inflation needs to be curbed and to this end, the government wants to encourage saving, which is good news for retirement planning as there are likely to be further tax savings put in place later in the year. Pensions are a good source of tax breaks for individuals and companies as they provide a good way to save as you are rewarded for doing so.

The most popular alternative to taking out a pension is investment in property, but apart from requiring a larger initial investment, property doesn’t provide the same type of tax savings with the housing market also being at risk with economic downturn. With a balanced portfolio – i.e., one that balances the amount of risk and certainty, individuals can expect more return on their investment than simply putting money into savings accounts which will not weather the impact of inflation, which is essential when you are talking about long-term investment.


The pension landscape is continually evolving, and individuals have a great degree of flexibility and choice. With long-term financial planning, there is ample opportunity to alter and adapt your investments according to your changing income. In addition, as you journey through life, your goals and ambitions will change.

Pensions as part of broader financial planning

As with anything, planning in advance is always crucial. The more you can invest and save for your own future retirement plans, the better. You might be 20 or in your 50s; it’s never too late. However, putting a pension into place within the larger framework of financial planning is the wisest course of action. Your pension plans will need to take into consideration your goals and plans for the future which will include your family or dependents, property, investments, shares or company ownership. Good professional financial planning should, therefore, include considerations around Inheritance tax, ensuring your will is up to date, tax savings and exit strategies from your business.

Enlist professional help with retirement planning

Whether you have existing pension schemes or want to set up a pension from scratch and are worried about global economic factors, it is essential you seek professional advice that is personal to you and your circumstances.

At Mercer & Hole, we pride ourselves in getting to know our clients on a personal level so that we can help them to achieve their goals. We have the technical knowhow, but it is our conversations and the details which really matter to our clients. When looking at pension options, we always consider the wider picture and take into account our clients’ needs in terms of tax savings, the property they own and their individual situations according to family interests.

Contact us

If you would like to some help or advice with pensions and financial planning as a whole, please don’t hesitate to contact me or a member of the financial planning team.

Michael Lapham director of financial planning

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