Pensioners buoyed as Bank of England increases interest rate AGAIN

Bank of England 'asleep at the wheel' on inflation says Carver

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The latest news from the central bank could be good for some, but worrying for others. Today, the Bank of England said: “The Bank of England’s Monetary Policy Committee (MPC) sets monetary policy to meet the two percent inflation target, and in a way that helps to sustain growth and employment.

“At its meeting ending on June 15 2022, the MPC voted by a majority of 6-3 to increase Bank Rate by 0.25 percentage points, to 1.25 percent. 

“Those members in the minority preferred to increase Bank Rate by 0.5 percentage points, to 1.5 percent.”

It is the fifth consecutive rise the central bank has enacted, as inflation continues to soar. 

Pensioners who are saving money may be buoyed by today’s base rate decision, but only if the rise is passed on by the banks.

With the state pension rising 3.1 percent this year, but still failing to keep pace with inflation, older people are essentially losing money in real terms.

A potential rise to interest rates could therefore be good news as it will help people to increase their cash savings.

For those looking to purchase an annuity, the news of a base rate hike is likely to be fantastic.

An annuity offers individuals a guaranteed, regular income in retirement.

Individuals can purchase this product using the entirety, or part of their pension pot. 

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Annuities have suffered years of poor rates, but have been on the rise recently, and could be boosted by today’s decision.

Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, said: “The last time we saw rates this high was almost eight years ago and there’s every chance we will see incomes breach £6,000 in the coming weeks.

“The major criticism of annuities is around their flexibility. Once bought an annuity cannot be unwound and so people feel they miss out on the potential for higher rates later. 

“However, there is no obligation to annuitise your whole pension on one day, you can annuitise in stages throughout your retirement.”

Andrew Megson, executive chairman of My Pension Expert, however, said things may not be all good for pensioners and pension savers.

He commented: “This boost in interest rates is unlikely to offer any meaningful comfort.

“Remaining calm in the face of volatility is absolutely crucial – panic could result in people making snap decisions and cause permanent damage to their future finances.

“Reviewing one’s retirement strategy as early as possible would certainly be advisable. So too, would exploring all avenues with the help of an independent financial adviser. 

“Indeed, options such as flexible-access drawdowns and riskier investments offering better returns could help Britons to best protect their hard-saved cash and hold its value against inflation – the key will be to utilise the expertise of an adviser to ensure Britons are choosing the option that best suits their needs.”

More to follow…

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