Inflation is still falling - but it is far above the Bank of England's 2 per cent target rate
To give a working example, if you are 67 and plan to retire in a year, assuming you have a pot of £87,500 in today’s money – roughly the average an over-50 will have by retirement, according to Pension Bee – then one year later, if inflation runs at 10 per cent, and your investment growth is 5 per cent, your pot would be worth £91,263.With inflation running at 6.8 per cent, your pot would be worth £85,313 – over £1,500 more.
“The risk for them is that they deplete their pot more quickly, particularly as stock market performance is currently more lacklustre than it has been in recent years,” says Ms O’Connor. She adds that during high inflation, and poor investment growth, there is a risk of a “double whammy” of people needing to take more out at a time when the real value of the pot may be going down.
To make matters worse, when people do withdraw too early in their fifties or sixties, that money is no longer there for them to invest later in their retirement. “If at all possible, you should try your best to avoid raiding your pension too much too soon; otherwise you suffer from what experts call ‘sequencing risk’,” explains
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