With the recent surge of interest rates to a 14-year high and the impending pension reforms, it is important to review your retirement savings. The Bank of England (BoE) has held 11 meetings since December 2021 and has raised the UK base rate each time, most recently to 4.25%. The Monetary Policy Committee (MPC) voted 7-2 in favour of the rate hike in response to the inflation rate unexpectedly rising to 10.4% in February. In the spring budget speech, Chancellor Jeremy Hunt predicted inflation to drop below 3 per cent by the end of the year, which now seems unlikely.

Those who are nearing retirement or are already retired will be especially concerned about what the rate hike means for them. An annuity is an option for those looking for a secure income in retirement. Annuity rates are closely linked to interest rates, so as the BoE raises rates, annuity deals typically improve. Those thinking about swapping their drawdown pot for a secure income should shop around to find the best deal and disclose any health and lifestyle conditions when applying to potentially increase the annuity income by up to 40%.

If you have savings:

Those with money in cash savings will benefit from the rate rise, though it may take a while for these changes to be implemented. Those with savings locked into a fixed rate will not be affected. The stock market has been volatile recently, and though higher interest rates could mean bad news for investments, the FTSE 100 hit an all-time high despite rising rates. Those near retirement should carefully consider how they want to draw income in retirement.

If you have debt:

With any luck, you will be debt free by the time you hit retirement. But we appreciate it isn’t always that straightforward. Life has a habit of throwing us curveballs and sometimes things don’t go to plan. For those with debt, borrowing will become more expensive, so it is important to consider paying them off or reducing them. However, accessing your pension early to clear debt may not be the best option, as it could lead to taxes, restrictions on contributions to a pension, and a compromise to future income goals.