The Bank of England has kept its interest rate at 0.1 per cent.
The UK economy has showed signs of recovery from its COVID-19 slump, helped by the fast rollout of the vaccination programme.
The interest rate is still at an all-time low.
Andrew Megson, executive chairman of My Pension Expert said it was wise to refrain from lowering base rates further.
“This will undoubtedly help to restabilise the economy. And as the market settles, so too will the value of pension investments – much to the relief of prospective retirees.
“That said, protracted periods of low interest rates will continue to affect those looking to purchase annuities, as annuity rates will remain at rock-bottom levels. Likewise, those reliant on defined benefit (DB) pension schemes may also find their retirement plans in jeopardy, as low base rates cause pension liabilities to skyrocket, making such schemes unaffordable for many companies.
“Such circumstances could cause some prospective retirees to panic. Without sound advice, some might even be tempted to opt for riskier investments to boost their retirement funds. As such, I urge individuals seek independent financial advice before making any knee-jerk decisions about their pension strategy. Doing so will enable Britons to safeguard their money and plan for the future with confidence,” he added.
And Denise Ko Genovese, Senior Personal Finance Editor of NerdWallet said the Bank of England is clearly reluctant to destabilise the UK’s economic recovery, particularly as the country is just starting to emerge from lockdown.
“As such, holding interest rates at current levels will likely offer relief to some.
“That said, consistently low interest rates will never be ideal for cash savers. Low rates, combined with modestly rising inflation could lead to people’s savings stagnating, or worse yet, losing value in real terms.
“But Britons should not panic. Instead, I would recommend investigating alternative savings options – and comparison sites are a good place to start for this. After all, some banks are still offering 1.25% interest with certain accounts. Alternatively, some may consider other savings strategies such as stocks and shares ISAs, provided they are fully aware of the risks involved beforehand. Taking the time to research all avenues will help individuals to remain in control of their savings,” she said.
