The pension market update: January 2025

Here’s what’s happening in the market right now and what to expect for pension performance in 2025.

January market performance

 

Deep dive into the investing market update for more detail, plus the US stock market news for January.

 

Investing market update

 

Pension performance for 2025

 

Stocks and bonds

Over the past few years, pension pots on the whole have experienced fluctuations in the UK. The simultaneous decline in stocks and bonds in 2022 impacted most pension pots, and while the stock markets began to recover, bonds have failed to rise to their pre-2022 performance since.

As a result, pensions with a higher proportion of shares will have generally outperformed those that hold a higher proportion of bonds. This is particularly relevant for individuals approaching retirement, as some workplace pension funds may automatically increase bond allocations as retirement nears.

When investing, your capital is at risk. Pension and tax rules apply.

 

Annuity rates 

Conversely, annuity rates have increased due to higher bond yields (a result of lower bond prices). A pension annuity is a product that turns your pension savings into a guaranteed income for a fixed period, the rest of your life, or even for a partner or dependant.

However, it’s rumoured that the Bank of England base rate will fall from 4.75% to around 4% by the end of the year. This suggests that annuity rates may also decrease as 2025 progresses, as annuit rates are linked to interest rates – when interest rates go up, providers generally offer better annuity rates. While annuity rates could be set to decrease, they’re still likely to remain higher than in recent times.

Moneybox does not offer personal financial advice or make specific recommendations based on your individual circumstances. If needed, seek independent financial advice before making decisions regarding your retirement.

 

Those with a Personal Pension most comfortable with retirement plans

A recent study found that those with a SIPP (self-invested personal pension) were most comfortable with how they intend to fund their retirement.

It also found that half of those over 55 – which equates to more than 10.5 million people – are worried that their retirement savings will not stretch to cover their whole lifetime in retirement. With 12% of those concerned that they might have to depend on their children for financial support in retirement.

Of the over 55s group, 86% say it’s important to have additional sources of income to fund their desired retirement, alongside the State pension. Currently, the State pension is just £221.20 a week, or £11,502.40 a year. However, the Pension and Lifetime Savings Association (PLSA) say that a single person would need £14,000 a year to maintain a basic standard of living.

Investing with a Moneybox Pension is a great way to bolster your income at retirement. It’s easy to do and you’ll get a 25% top up from the government on your contributions in the form of pension tax relief. Plus, we can help you track down and combine any old workplace pensions.

 

Explore the Moneybox Pension

 

As with all investing, the value of your pension can go up and down, and you may get back less than you invest. Tax treatment depends on individual circumstances and is subject to change. When deciding whether to transfer your pension, it’s important to compare the charges, investment options & benefits between Moneybox and your old provider. Moneybox cannot accept a transfer from a pension your employer is currently paying into. Moneybox does not currently offer drawdown or annuity products.

 

*Google Finance, 2 January – 31 January 2025