Omg 18%

bostonerimus

Look on the bright side, this time next year annual inflation will probably be way down...unfortunately the cost of living will probably still be just as high or even higher. Then politicians can point to single digit inflation and continue to ignore that no one can afford to live.

bostonerimus

dunstonh said:

How the hell can anyone make rational financial descisions for pensions in this current climate?

Nothing has changed in your planning.    Financial crises happen on average every 7 years.   Energy crisis happen less frequently in recent times but one would be expected in a typical retirement period.   Inflation and boom/bust would be expected as well.  So, as long as you have a sensible draw rate, you should be fine.   If you are pushing it then expect things to get rough.

In theory, equity returns should be inflation-neutral. In practice, I guess we're about to find out.

Historically, they don't exactly follow the inflation rates but they do tend to once the negative news gets out of the way.

This is all true, but many people won't be able take any comfort in your observations. I was pretty diligent in stress testing my retirement plan, but even in my worst inflation runs I only had it at just over 10% for a few years thanks to the influence of the 1970s. So I imagine many people are freaking out. If I was doing drawdown I think I'd find it difficult to increase it by inflation of 18%, doubly so when the stock market is down and I'd be taking a lot more from a smaller pot. So my strategy would be to go to my budget and cut where I could. If people don't have a detailed budget, now is the time to write one down so they can cut out Netflix and Starbucks for example and forget about holidays...at least I would.

JoeCrystal

sgx2000 said:

So there are now inflation predictions of 18%....

How the hell can anyone make rational financial descisions for pensions in this current climate?

Like how one decides for all financial areas, with consideration and thoughts! There is nothing that one cannot do about inflation, unfortunately! I don't think inflation is going away soon, especially with the Living Wage report coming out on 22nd September. My employer's accountants are already forecasting 10% to 20% increase on £9.90 per hour to their staffs.

arnoldy

Inflation at 18%. But 85% of people who buy annuities bought level (fixed) annuities. I always thought these were some of the most dangerous products allowed on the market. 

Moby

I wonder whether we'll get matching increases in our ndex linked LGPS pensions this Sept. Wouldn't be surprised if the Govmt capped them!
I reckon I'll still get a larger increase than the pay increase I'd have got if I'd continued working though. 

westv

I'm going to check out the price of flared trousers and kipper ties.

Sea_Shell

Well it does seem like quite a few "what ifs" are turning into "now whats"  

Personally going to have my plans stress tested to within an inch of their lives over the next couple of years. 


Hold tight in the back!!! 

daveshep26

bostonerimus said:

dunstonh said:

How the hell can anyone make rational financial descisions for pensions in this current climate?

Nothing has changed in your planning.    Financial crises happen on average every 7 years.   Energy crisis happen less frequently in recent times but one would be expected in a typical retirement period.   Inflation and boom/bust would be expected as well.  So, as long as you have a sensible draw rate, you should be fine.   If you are pushing it then expect things to get rough.

This is all true, but many people won't be able take any comfort in your observations. I was pretty diligent in stress testing my retirement plan, but even in my worst inflation runs I only had it at just over 10% for a few years thanks to the influence of the 1970s. So I imagine many people are freaking out. If I was doing drawdown I think I'd find it difficult to increase it by inflation of 18%, doubly so when the stock market is down and I'd be taking a lot more from a smaller pot. So my strategy would be to go to my budget and cut where I could. If people don't have a detailed budget, now is the time to write one down so they can cut out Netflix and Starbucks for example and forget about holidays...at least I would.

When things go haywire, I think you still need that personal responsibility / discipline if you want to come out in reasonably good shape - I emphatically agree with this, cut your costs to stay as close to where you're aiming,

I personally have always had a budget planner and the contingency line was probably the critical one, this used to be for trips/ bigger holidays/ (extra) cycling stuff/ gadgets and (OFC) when things went out of kilter .....  Essentially previous version's contingency is now wiped out with several thousands extra energy costs and I'll have to attack the budget again to get to contingency v2.0 (but the overall strategy remains in place including some travel/ core holidays)

Stick to the strategy -but do take serious action!!   

SouthCoastBoy

Moby said:

I wonder whether we'll get matching increases in our ndex linked LGPS pensions this Sept. Wouldn't be surprised if the Govmt capped them!
I reckon I'll still get a larger increase than the pay increase I'd have got if I'd continued working though. 

People with public sector pensions are the lucky ones they are protected by inflation. From what the government is saying it also looks like people receiving benefits are also protected, it's the workers and people with private pensions that are going to take the hit

saucer

SouthCoastBoy said:

Moby said:

I wonder whether we'll get matching increases in our ndex linked LGPS pensions this Sept. Wouldn't be surprised if the Govmt capped them!
I reckon I'll still get a larger increase than the pay increase I'd have got if I'd continued working though. 

People with public sector pensions are the lucky ones they are protected by inflation. From what the government is saying it also looks like people receiving benefits are also protected, it's the workers and people with private pensions that are going to take the hit

Of course people with public sector pensions who are still working are less well protected than those in payment. For people with ‘gilt edge’ final salary schemes inflation is of little benefit if the salary is lagging it. Wage inflation significantly lower than in private sector on average.