PensionBee urges savers to increase contributions ahead of ‘market rebound’

Savers that increase their pension contributions ahead of a possible market rebound could see them make up for “years of savings neglect”, as well as recent losses due to Covid-19, PensionBee has said.

According to new modelling from the provider, if markets bounce back to their pre-coronavirus peak values within the next five years people could get their retirement saving “back on track”.

It found that if a saver in their 50s with an average pension value of £48,500 makes a £10,000 contribution while markets are down 20 per cent, they could boost their pension by around £53,000 more then if they kept it in cash over a 15-year period.

This outcome relies on markets recovering within one year and would amount to an additional annual retirement income of approximately £2,000.

If markets recover in three years instead of one, the same scenario would generate a pension increase of £41,500 over the 15-year period than if it was kept in cash.

PensionBee noted that markets took five years to recover from the 2008 financial crisis, which would result in a £31,000 improvement in pension savings if the same applied to the Covid-19 pandemic with a £10,000 contribution.

Commenting on the findings, PensionBee chief executive, Romi Savova, said: “Time and time again, periods of economic uncertainty have proven to be a great opportunity for investors of all sizes to benefit.

“Downturns can often enable investors to take advantage of price falls, leading to greater returns during market recovery.

"While the 2008 financial crisis took around five years to recover, it is possible, given the speed of the downturn in this bear market, for markets to recover more quickly, say in one-three years.

“If savers can afford to make additional contributions to their pensions now, ahead of recovery, they could make up for years of savings neglect and put themselves in a strong position for retirement.”

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