Gilt Yields sink to record low - What does it mean for Pension Savers?

01 July 2016
 

Following the UK’s shock vote leave the EU and clear signals by the Governor of the Bank of England yesterday that more monetary easing is in store, 10-year gilt yields have fallen to a record low level today. David Smith, Director of Financial Planning at Tilney considers how this will affect savers approaching retirement.

Smith comments: “While so far the stock market has defied some of the most apocalyptic predictions made during the referendum campaign, there has nevertheless been a flight to perceived safe havens, including UK Gilts. As prices have nudged higher, yields have crumpled. With a very clear signal that further interest rate cuts are on the cards, and possibly another round of Quantitative Easing (QE), UK Gilt yields are now at an all-time low.

“As pension annuities are directly linked to gilt yields, the amount of income a retiree can secure from their pension has already fallen significantly and a further QE stimulus will only serve to compound the problem. Final salary pension schemes have too felt the wrath in the wake of Brexit with funding deficits widening on a daily basis, increasing the risk of insolvency for employers and wind up of the scheme itself. Cash savers are likely to be hit with lower interest rates for longer and investors who are looking for a safe haven are presented with high costs and low yields.”

So what can be done?
“Savers must not panic. Those approaching retirement in the near term should perhaps consider delaying for a period or perhaps looking to alternative forms of retirement instead of an annuity, for example, taking withdrawals via flexible drawdown or buying a third-way annuity that can provide a fixed income for a short term, ultimately delaying the decision to conventionally annuitise.

To discuss this or any other financial planning topic please contact David Smith on 0191 269 9970/ david.smith@tilney.co.uk

-ENDS-

Important information

The value of investments, and the income derived from them, can go down as well as up and you can get back less than you originally invested.  This press release is not advice to invest or to use our services. If you are in doubt as to the suitability of an investment please contact one of our advisers.

Once set up, an annuity cannot normally be changed or cancelled, therefore it is important to consider all of your options. Before accessing your pension it is important to consider all of your options, if you are unsure of these you should seek professional financial advice or visit Pensionwise.gov.uk

Press contacts:

Gillian Kyle
0203 818 6846 / 07989 650 604
gillian.kyle@tilneybestinvest.co.uk

About Tilney

Tilney is a leading investment and financial planning group that builds on a heritage of more than 180 years.  Our clients are private investors, charities and professional intermediaries who trust us with over £23 billion of their assets. We offer a range of services including financial planning, investment management and advice and, through our Bestinvest service, a leading online platform for those who prefer to manage their own investments.

We have won numerous awards. Tilney has been awarded Best Conventional Advisory Service at the 2018 City of London Wealth Management Awards, Best Advisory Service in the 2015 City of London Wealth Management Awards; Investment Award – Cautious category in the Private Asset Management Awards; and Stockbroker of the Year, Execution-only Stockbroker of the Year and Self-select ISA Provider of the Year 2015, as voted by readers of the Financial Times and Investors Chronicle. Bestinvest was voted Best SIPP Provider and Best Fund Platform at the 2017 City of London Wealth Management Awards, Best Direct SIPP Provider at the YourMoney.com Awards 2017, Best Stocks & Shares ISA Provider at the 2017 Shares Awards, as well as Best Self Select ISA Provider, Best Online/Execution-only Stockbroker and Best Investment Platform 2017 at the FT and Investors Chronicle Investment and Wealth Management Awards, as voted by readers of the FT and Investors Chronicle.

Headquartered in Mayfair, London, the Tilney Group employs over 1,000 staff across our network of 30 offices, enabling us to support clients with a local service throughout the UK.