The cost of Trump’s tariffs on pensions

Individuals saving into a defined contribution pensions scheme are set to be the most impacted by the economic turmoil created by US President Donald Trump’s tariffs, according to a new report.

In the wake of the “economic turbulence” felt across the globe by the president’s actions, the Society of Pension Professionals (SPP) has produced a study looking at the possible effects on people’s pension pots.

It says: “Given the scale of the equity market falls since early April 2025, and the fall in government bond yields, it is possible that some DC (defined contribution) savers may see a reduction in retirement income of up to 20 per cent.”

And it adds: “Given the speed and volatility of such moves, those individuals may decide to delay taking their pension where possible.

“This may be a sensible step if markets are to recover in the short term but unfortunately nobody knows if a short-term recovery is likely. Deferring retirement means the savings pot remains invested and has the potential to grow but the plan value can go down as well as up.”

The impact on the UK’s 11 million-plus retirees will depend on how pensioners have funded their retirement.

For the 1.2 million who rely on nothing but the state pension, their incomes will not be affected. Likewise, those with a fixed annuity should not be affected by the current market turbulence because their income in guaranteed.

However, the report adds: “DC savers who regularly sell a small portion of their investments to fund their retirement (known as drawdown) will face a difficult decision.

“Do they sell less today, resulting in less income, in the hope that their pension pot will recover in the future or do they keep drawing down the same amount, knowing that they may have less to depend on in the future?

“Withdrawing during a downturn is always likely to reduce funds faster, so taking independent financial advice on a flexible withdrawal strategy is strongly advised.”

The SPP report provides reassurance to people in a Defined Benefit (DB) scheme – including Local Government Pension Schemes – saying they are likely to be largely unaffected.

Simon Daniel, who chairs the SPP’s Investment Committee, said: “The world is again enduring a period of financial turbulence and this has naturally created some uncertainty for UK savers and investors.

“The overall message from this paper is that making significant, reactive changes to pensions and other savings is generally not ideal compared with keeping a cool head and planning carefully.”

The SPP report adds: “The current volatility serves as a reminder of the importance of regular, long-term saving into a pension across a diversified portfolio of investments.

“Diversification of assets adds genuine value through risk mitigation. Consequently, steps that limit investment freedom can be unhelpful.

“Just as falling markets can provide challenges if you need to sell, they can also provide opportunities for investment targeting long-term growth.

“The challenge is how individuals can adapt their portfolio as they near retirement – a challenge that the pensions industry is continuing to tackle.”

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