Interest rates subsequently fell to a new historic low of 0.25% earlier this month, in response to a perceived economic slowdown following the referendum decision for the UK to leave the European Union.
The low interest rates we are currently experiencing are the result of a number of factors.
These factors include fragile economic growth, with growth estimates being revised from 2.3% to just under 1%, and low price inflation, with inflation being below the Bank of England’s 2% target since December 2013 and below 1% since November 2014.
The Bank of England and other central banks globally have been seeking to encourage investment and consumer spending in order to support economic growth and stable inflation.
Lower interest rates can however be a cause for concern for people approaching or living in retirement.
As part of her summer internship at Informed Choice, Charlotte Davis has prepared a briefing note about low interest rates and retirement planning.
Charlotte is an economics student at Exeter University, who is spending a fortnight with Informed Choice this summer to gain experience of Financial Planning in practice.
With no reasonable expectation of an interest rate rise in the near term, retirees face an important question: what do low interest rates mean for your retirement plans?
In an attempt to answer this important question, we have taken a closer look at the impact of low interest rates on pensions, cash savings, investments and mortgages.