The UK economy continues to get worse, official figures show, prompting retirement experts to warn of pain for British pensioners.
The size of the UK economy fell by 0.7 per cent between April and June this year, according to official figures from the Office for National statistics.
The contraction in gross domestic product (GDP) – a measure of a country’s economic output - was much bigger than the government and many economists expected and it follows a string of dire financial news for the UK.
Nigel Green, chief executive of financial advisory firm the deVere Group, believes this is another hammer-blow for people approaching retirement.
This is because the news is making it more likely that the Bank of England will announce a further round of quantitative easing (QE).
More misery for retirees
Quantitative easing is potentially bad news for people who are about to take their pensions as it can have a detrimental effect on annuity rates, a financial product which many people rely on in retirement for an income.
You can read more about how QE affects annuities here.
Green says: "These GDP figures highlight the depth of the UK recession. Yet it is highly unlikely that the Bank of England’s Monetary Policy Committee will move away from its ‘Plan A’, which is to pump money into the economy whenever it falters.
"As such, we forecast that the Bank of England will expand its QE programme by an additional £50 billion in November. And more QE means more misery for retirees."
Consumers told to ‘be prepared’
Alessandra Quartucci, head of savings, mortgages & current accounts at Confused.com, believes the fall in GDP could have consequences for all British consumers and savers, not just those approaching retirement.
She says: "We all need to react as soon as possible to ensure we are financially ready for anything that may come as a result of the ongoing recession.
"A recession or fall in GDP represents a decline in the national income in terms of wages, output and profits and is usually closely related to a rise in unemployment.
"What recession means to British consumers is potentially more redundancies by companies, salary cuts or increased difficulty in finding new jobs.
"Consumers need to make sure they are prepared for this, by ensuring they have an emergency savings pot in case they lose their jobs.
"This money should be kept in an easy access account, where it can be taken out as often as necessary and with no notice required."
Shop around for great deals
Quartucci says if you feel you can't afford to save, you should review your finances and speak to your bank.
She adds: "Find out what interest rate you are getting on your existing savings account and switch to a different one if this is not satisfactory – the current market leading rate for an easy-access account is 3.24 per cent with ING's Direct Savings Account.
"You should also have a look online to see if you can find a better mortgage rate. Compare your energy tariffs to see if you can get a better deal, and see if you can get a 0 per cent balance transfer credit card to cut your debt and the interest you pay on it.
"Finally, using a price comparison site like Confused.com can enable you to search for great rates and deals which are essential in times like these."
