Important information: The value of investments and the income from them can go down as well as up, so you may get back less than you invest.

WITH inflation at a 40-year high and all hopes dashed of the Bank of England easing up on further interest rate rises, anyone in or approaching retirement might very well be feeling particularly uncomfortable right now.

Living on a fixed income when the cost of living is racing ever higher is unsettling to say the least. Just how high inflation will get, how much costs will rise by and just when it will all ‘normalise’ is the great unknown right now. If you’ve been diligently saving into your pension all your working life, realising you’re looking at a shortfall makes for worrying times.

After all, retirement misery is something we all work hard to avoid; diligently saving into our pensions our entire working lives to avoid that unpleasant financial pinch.

Buying an annuity may not be something you’d planned, but it might be something you want to consider now. An annuity will guarantee you a set income for the rest of your life. And because you lock in the amount of income your annuity will give you, it makes even more sense to buy when rates are high, like now.

When interest rates go up, so too do annuity rates. So right now, after the recent interest rate rises, and more expected, it could be a good time to lock in some income certainty.

Of course, it’s not as simple as the annuity rate alone; the factors that determine exactly what you get vary widely from person to person, with age, gender, health and choices like whether to opt for inflation protection, affecting how much fixed income your money will buy you, and quite considerably.

As rates are widely expected to rise further, you could play it even smarter and take a slow and steady approach; using some of your pension pot to buy an annuity now and buying another later when rates rise even further.

If you still don’t want to go down the annuity route entirely, or even at all, then taking a stock-by-stock approach can help you dodge the inflation-losers and take aim at the high-interest rate winners, such as the banks, healthcare and other companies sitting on nice little cash piles that do well when interest rates rise.

Banks for example, earn more when interest rates rise, based on the simple fact that they can charge more on the money they lend. Yes, savings rates rise too, but as any cash saver will testify, nowhere near as much as lending rates do. So investing in the banking sector can be a wise move - as interest income and operating profit margins benefit.

And a similar uplift occurs in companies with a decent sum of cash in the bank. Cash-rich companies benefit from rising interest rates, because they earn more on their cash reserves.

Uncertainty is rife, costs are high but keep the faith and don’t lock in losses that you’ll have to live with for years to come.

The Government’s Pension Wise service offers free, impartial guidance to help you understand your options at retirement. You can access the guidance online at or over the telephone on 0800 138 3944.

Fidelity’s Retirement Service also has a team of specialists who can provide you with free guidance to help you with your decisions. They can also provide advice and help you select products though this will have a charge.

Important information: Investors should note that the views expressed may no longer be current and may have already been acted upon. Tax treatment depends on individual circumstances and all tax rules may change in the future. Withdrawals from a pension product will not be possible until you reach age 55 (57 from 2028). This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.

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