As another year draws to a close, it’s important that the pensions sector not only reflects on the past 12 months but looks ahead at things to come.
2022 has not been an easy year for pension planning. Pension planners have had to grapple with significant economic and political instability, including 40-year high rates of inflation, nine consecutive interest rate hikes, and three prime ministers leading to low levels of confidence in the government. Accordingly, My Pension Expert’s own research found that over a third (36%) of UK adults over 40 are unconvinced that the government will be able to stabilise the pensions market.
Such events have resulted in many economists touting 2023 to be yet another challenging financial year, which will come as little comfort to savers. And many might be questioning whether the coming year will present any opportunity to regain control of their financial future.
Positively, My Pension Expert has identified some opportunities for Britons in 2023 to do just that and help them to restore some confidence in their financial futures.
Triple-lock pension returns
One of the defining announcements made in this year’s Autumn Budget was the Government’s pledge to reinstate the state pension triple lock, a move that will see the state pension rise by 10.1%. This was certainly welcome news for pensioners, who were denied the extra few hundred pounds a year after the government broke their manifesto pledge to protect the policy last year.
However, inflation will continue to plague Britons in 2023. Even if it is predicted to increase less sharply, it remains reliant on numerous factors beyond government control, such as the Russia-Ukraine war. Adding to this pressure is the fact that the UK’s energy price cap is set to increase in January. This might mean that retirees might still find themselves feeling the cost of living pinch, even with the increase in their state pension.
Accordingly, Britons at, or approaching, retirement should make sure they’re engaging fully with their retirement strategy and exploring all available options regarding their retirement income.
An opportunity for engagement
Pension engagement has been a long-running issue in the UK, with millions of people losing track of their pension pots. This is largely due to increased fluidity within the UK’s labour market.
Indeed, it’s now commonplace for people to have worked for six or more companies throughout their careers – and with every new job comes a new workplace pension scheme. These can be hard to keep track of. It is currently predicted that there is approximately £27 billion worth of pensions sat unclaimed because people have lost track.
The government is hoping to remedy this with the launch of their pensions dashboard, which is set to launch in 2023. Indeed, if the government remains on track, the state pension, along with large master trusts and most personal and stakeholder pensions will all be connected to the dashboard in April – auto-enrolment and public service schemes are due to be connected over the following 12 months.
Assuming all goes to plan, 2023 could be a revolutionary year in the democratisation of pension information. That said, access to pension information can transform engagement, consumers must not feel that they have to make sense of all this information alone, nor create a retirement strategy by themselves. Instead, Britons should consider seeking independent financial advice, in order to better understand their information, and empower themselves with the knowledge to make informed financial decisions to secure their financial future.
Getting Advice and exploring all options
Pension information can be incredibly complex, and an independent financial adviser can be a vital tool for savers in helping them to understand what it all means. Further, they can help savers understand what it will mean for their future finances.
Take, for example, our team of advisers at My Pension Expert. They will consider the entirety of a client’s pension information, their wider financial circumstances, and their retirement goals and make tailored recommendations to help them to achieve the best possible outcome at retirement.
From recommending an annuity to a flexible access drawdown, or even higher-risk investments (if one’s risk appetite allows for it), My Pension Expert’s advisers will empower clients with all the information they need to make the most informed decision possible.
Economic challenges are predicted to continue throughout 2023. However, the coming year also presents some opportunities for savers to regain control of their future finances. And if Britons make use of all the tools available to them, and seek advice where possible, they should be able to plan for their financial future with greater confidence in 2023.