Alert to savers with defined contribution schemes over Donald Trump tariffs

Business Mayor

08-05-2025

Savers are facing a pensions nightmare triggered by Donald Trump's trade war, with experts warning tens of thousands may have to postpone retirement — or even head back to work.
A leading pensions body has issued a stark warning that pots built up over decades could shrink by as much as 20%, wiping tens of thousands of pounds from retirement savings.
The alert follows the former US president's decision to slap swingeing new tariffs on imports from almost every country, triggering turmoil on global stock markets and a spike in borrowing costs.
The Society of Pension Professionals (SPP), which counts household names like Aviva and Legal & General among its members, said those in so-called defined contribution (DC) schemes — where savings rise and fall with the markets — were taking the biggest hit.
In a report issued this week, the SPP warned: '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 savers may see a reduction in potential retirement income of up to 20%.'
The group added: 'Given the speed and volatility of such moves, those individuals may decide to delay taking their pension where possible.'
Some already in retirement may be forced to rejoin the workforce, it said, in a bid to make up for shortfalls caused by falling investment returns.
'They will face a difficult decision,' the SPP warned, as many retirees rely on regularly selling parts of their investments to cover day-to-day costs.
The alarm bells were triggered after Mr Trump's so-called Liberation Day on April 2, when he unveiled a raft of protectionist measures — including tariffs of more than 100 per cent on Chinese imports — sending financial markets into a tailspin.
In the week that followed, the S&P 500 — America's leading stock index — slumped by more than 12%, before staging a partial recovery as the White House softened its stance.
Borrowing costs also jumped in both the US and the UK, piling more pressure on pensions and investments. Surging bond yields in America were reportedly a key factor behind Mr Trump's decision to delay implementing the tariffs for 90 days.
While more than 30 million Britons are enrolled in a workplace pension, most will be shielded from the worst of the turmoil, as savings are usually shifted into safer assets like bonds or cash as retirement approaches.
However, tens of thousands with a heavy weighting in shares and riskier investments could face serious losses — especially those close to cashing in.
Simon Daniel, of the SPP, said: 'The world is again enduring a period of financial turbulence and this has naturally created some uncertainty for UK savers and investors.'
Those on defined benefit pensions — often referred to as gold-plated schemes — as well as state pension recipients, are unaffected.
But the wider economic fallout could be grim. The International Monetary Fund last month sharply downgraded the UK's growth forecast, blaming trade tensions. In response, markets are now pricing in interest rate cuts, with the Bank of England expected to trim rates from 4.5% to 4.25% this Thursday.
In the meantime, ministers are racing to shore up Britain's trade position. A deal with India was announced this week, while talks are ongoing with the US over a post-Brexit pact that could see punitive tariffs — including a 25% levy on British-made cars — scrapped. Read More NatWest and Lloyds to axe a further 81 bank branches
A separate agreement with the EU is expected to be unveiled later this month.
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