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.”
What could be good news for pensioners regarding interest rate rises are increases to annuity rates.
Hargreaves Lansdown explains annuity provides typically buy Government bonds to generate returns, and so low interest rates push these returns down.
A rise in interest rates should push annuity rates up as a result, good for those relying upon this method to fund their pension savings.
Annuities offer fixed income for life, and so higher rates are likely to provide more stability for retirees.