For the first time in a decade, the Bank of England has increased interest rates. The bank announcement of the hike from 0.25 per cent to 0.5 per cent was made on 2nd November. Savers are apparently one of those who would benefit from the hike with anticipated slight growth in their returns. Pensioners will as well see a modest boost in interest income, unless however they decide on pension transfers. To have a significant effect on pensions though, future unlimited increases will have to be imposed.
Leading financial consultancy, Hymans Robertson, states that the BOE rate increase may not that be promising for pension funds as other analysts predict. With the ongoing economic uncertainty, focus on assets that deliver anticipated returns to manage pension fund expenditure is highly recommended.
Several investment companies say that the hike will give pensions a slight boost. However, for pension funds to benefit fully, interest rates should influence steady regains in annuity and deficit reduction in company pension plans. This is unlikely to improve the pension sector if BOE adheres gradual increases. Moreover, pension transfer rates are expected to drop following the BOE announcement. This has raised concerns for those who intend to engage a transfer.
Other pension experts think that the rate rise was enforced to control inflation, which could affect state pensions in the coming years. Brits with pension cash or those banking on pension for their retirement are likely to experience unforeseen consequences of future rate increases. In September, the UK’s inflation reached 3 per cent and is likely to rise further.
The government’s Triple Lock Policy, which was introduced in 2011, guarantees a yearly increase in the basic state pension by at least the minimum rate of 2.5 per cent over the inflation rate or earning growth depending on whichever is the highest. With the inflation of 3 per cent, the state pension is therefore expected to rise by 3 per cent in April 2018. The Institute for Fiscal Studies’ recent assessment earlier this year states an increase in state pension value by 22.2 per cent from April 2010 to April 2016 compared to growth in incomes and price increases over the same period. Thus, pensioners’ incomes have nearly doubled with the enforcement of the Triple Lock Policy.
The implications of the Bank of England’s rise in interest rates on the people’s pension cash may leave pensioners undecided on managing their funds. Your pension consultancy or investments firm may want to contact a segment of 10 million British pensioners and advise them further on how to manage their pension investments in the face of economic uncertainties and the BOE’s gradual and limited rate hikes. Contact Datablazers Inc. now for collaboration on your campaigns. We provide responsive Pension Leads, people interested in consultancies that offer effective and comprehensive solutions for their financial needs. Help today’s pensioners achieve fiscal security and sustainability with your services. Call DBI for more information.