Inflation - what will happen to pensions in 6 months/1 year and 5 years' time

Journalist: Samantha Downes, Currently at the I (business editing some Sundays (freelance) and Mortgage Solutions

ended 19. May 2022

Looking for predictions and are pensions a way for young people to save and hedge against inflation?

I already have comment saying final salary members will be forced to put off early retirment.

2 responses from the Newspage community

"Investing rather than saving is a great way to protect against inflation. Interest rates on savings accounts tend to lag inflation. Returns from shares/equities tend to outpace inflation over the long-term. Contributing to a pension will give you an extra boost as you also benefit from the tax relief on your contributions."
During periods of very high inflation, it's actually quite difficult to hedge against this. This is because even equities, which traditionally are a good hedge, tend to struggle in this scenario. That said, if you're a young person paying into your pension, you should welcome the current market falls with open arms. Falling markets mean that your regular pension contributions are buying more units and, when markets eventually recover, as they tend to do, you should have benefited from having bought low. I recall during the banking crisis that, despite paying in each month, my pension pot wasn't growing for about two years, as the contributions were in effect simply offset by the market falls. However, when markets then started to recover, this had the effect of 'turbo charging' my pension pot. This was because all of those extra units I had bought during the low periods added significantly the value of my overall pot. So, perhaps the best course of action is to ignore the market 'noise' and keep putting money away in your future regardless.