How to reduce the impact of inflation on retirement income

During periods of economic uncertainty, it’s advisable to reassess your retirement plan

Living on a fixed income such as a pension during high inflation can be challenging. As costs rise, your monthly income remains the same, potentially causing your pension pot to deplete faster than anticipated and impacting your retirement standard.

Whether your retirement income will last for the rest of your life and manage to combat inflation depends on a wide range of factors, including the size of your pot and what you choose to do with your retirement savings.

During such periods of economic uncertainty, it’s advisable to reassess your retirement plan and consider any necessary adjustments.

There are several strategies that retirees can employ to reduce the impact of inflation on their retirement income to help protect their pension income from the cost of living increases:

Retire later: Delaying retirement can help you avoid periods of high inflation, protecting your pension investments from potential stock market volatility.

Use Cash Individual Savings Accounts (ISAs) first: If you have other savings, like Cash ISAs, consider using them as a backup source of income before drawing on your pension. This strategy allows time for stock markets to recover and your invested retirement pot to grow.

Withdraw less: Reducing your pension withdrawal amount might seem counterintuitive during a cost of living crisis, but it can help your pension grow in the long run. Keeping more of your pension invested could potentially allow it to grow at a similar rate to inflation.

Stay invested, but understand where: It’s important not to panic and sell your investments during volatile market conditions. Instead, consider where your funds are invested and if any adjustments need to be made.

Add to your pension: Volatile stock markets can present an opportunity to buy more assets at lower prices. Consider topping up your pension pot, but be aware of tax implications if you have already begun drawing on your pension.

Need help to understand what retirement choices you have?

Every individual’s situation is different. It’s always essential to seek professional financial advice when considering changes to your retirement planning. For a conversation about tailor-made options that suit your requirements, don’t hesitate to contact us to learn more.

A PENSION IS A LONG-TERM INVESTMENT NOT NORMALLY ACCESSIBLE UNTIL AGE 55 (57 FROM APRIL 2028 UNLESS THE PLAN HAS A PROTECTED PENSION AGE). 

THE VALUE OF YOUR INVESTMENTS (AND ANY INCOME FROM THEM) CAN GO DOWN AS WELL AS UP, WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE. 

YOUR PENSION INCOME COULD ALSO BE AFFECTED BY THE INTEREST RATES AT THE TIME YOU TAKE YOUR BENEFITS.