Falling pension and investment values, combined with the rising cost of living, are both understandable causes of concern for many people at the moment. We look at the potential impact if you’re approaching retirement, and what you can do to keep your plans on track.

Some commentators have called the combination of soaring inflation and market falls ‘double depletion’ for retirees.

This is because they need to spend more to cover normal living costs at a time when the value of their pension and other retirement savings has fallen.

Think of retirement savings as a pie. Double depletion essentially means the size of the pie has got smaller but the slice you’re taking is bigger. If you keep taking a bigger slice on a regular basis, you’ll use up your savings more rapidly. Plus, it will be harder for your remaining money to recover its value and continue to provide a retirement income for as long as you need it to.

A poll by Interactive Investor found that one in five people said they expected to delay retirement because of falls in the value of their investments.* If you’re in this situation, here are some things to think about to help you understand if you really do need to do that, or whether you can go ahead and plan your future with confidence.

1. Understand what you have

Your retirement income can come from a variety of sources - not just your pension savings or any income you’ll get from final salary-type pensions (also known as defined benefit pensions).

You might also have individual savings accounts (ISAs), other savings and investments, or rental income from property you let out. And, of course, the state pension will give you a welcome top-up when you’re eligible – currently age 66, although this will rise in the future. When you take everything into account, you might have more than you think.

2. Is this enough for the future you want?

Once you know what you have, think about what you’ll need in the years to come and how long that may have to last. Remember that retirement could be 30 to 40 years.

As well as what you’ll need to cover everyday living expenses, do you have any specific plans for your retirement, such as regular holidays or enjoying a hobby? Or are you thinking of any big one-off purchases or expenditure, like a new car or home improvements?

If you’re not sure how much you might need, the Pensions and Lifetime Savings Association’s Retirement Living Standards** can help. They aim to make it easier for you to understand how much you might need based on the kind of lifestyle you want to have in retirement.

3. Explore all your options

Even if you’ve seen the value of your pensions and investments fall that doesn’t necessarily mean that you’ll have to delay your retirement altogether.

Consider flexi-retirement

You could consider staying with your current company with reduced hours or take a new part-time job, meaning you’re less reliant on your pension for income. You can find out more about flexi-retirement here.

Re-think how you take your money

Could you take less from your pension savings and investments until their value recovers, and use other savings instead to bridge the gap? And could you put off any big purchases you’d planned?

Look at other potential income options

If you’re lucky enough to have any income from final salary pensions, you’ll receive a guaranteed amount each year. And this will generally increase each year too, as will your state pension once you start receiving this.

Other potential income options include downsizing your home, or equity release. Neither of these are decisions to rush into, but they may be choices that can keep your retirement plans on track.

4. Get guidance or advice

If you’re concerned about how market volatility and inflation could impact your retirement, there’s lots of information and support available.

To find out more about inflation, read our short guide Interest rates and inflation explained.

The MoneyHelper website has useful information on pensions and retirement. You can also get free and impartial guidance from their team of pension experts over the phone or online.

Alternatively, a financial adviser can assess your personal circumstances, and tell you what’s possible and when. That way you know you’re making the right decisions for you and your future, but be aware that there’s generally a cost for getting financial advice.

If you have an abrdn financial adviser, you can contact them in the usual way.

If you don't have an adviser, see how our financial planning services could help with your retirement planning.


*Source: inews.co.uk - Cost of living crisis: Savers forced to delay retirement and house buying plans
**For more information about the Retirement Living Standards, visit www.retirementlivingstandards.org.uk

The information in this article should not be regarded as financial advice. Information is based on our understanding in July 2022. The value of all investments can go down as well as up, and you may get back less than you paid in.