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What is rising inflation doing to your savings?

By April 26, 2017 October 22nd, 2020 No Comments
Consumer FinanceEmployee Benefits

What is rising inflation doing to your savings?

By April 26, 2017 October 22nd, 2020 No Comments

The Office for National Statistics (ONS) recently confirmed that inflation calculated by the Consumer Prices Index (CPI) rose from 1.8% in January to 2.3% in February, a figure above both the Bank of England’s own target of 2.0% and the figure of 2.2% predicted by many financial commentators. This rise will obviously have an impact on how far the money in your wallet is likely to go, but what about the money you may have saved or invested?

Unfortunately, the recent rise means that it will be harder than ever for your savings to generate real returns. The value of any money you have in a typical high street savings account will now be eroding more quickly than before and it’s now even harder to find a savings option which will actually beat the 2.3% figure. Many of the accounts which exceed this rate are Help To Buy ISAs, but this makes them unavailable to anyone not saving towards their first home. Other options open to all savers struggle to beat the new inflation figure – even the new NS&I savings bond, which will pay 2.2% and was heralded by the Chancellor, Philip Hammond, as offering welcome respite for savers, will no longer be able to keep pace.

Away from savings accounts, investing in stocks and shares, either through an ISA or a Pension, or using such products as specialist property funds, offer higher rates of return and tend to keep pace with inflation, but equally come with an increased level of risk.

An important part of putting money into any form of Saving or Investment is to take advice whenever it is available to ensure that decisions taken are aligned with the risks and potential returns the individual is prepared to accept. Such decisions should then be reviewed on an annual basis so that as such things as inflation change then previous decisions can be reviewed and amended where appropriate to do so.

The process of advice and review is one of the important messages we tell to all employees we meet through our Financial Education and Advice services where we aim to get people to make educated and informed decisions to protect the wealth they have now, as well as that they can expect in the future. If you feel that the current inflation position is one that your staff should be factoring into their savings and investment decisions then please speak to your Creative consultant or contact us on info@creativeeb.co.uk and we will be happy to explain how our services can be extended to cover this for you.

Whilst the present situation doesn’t offer much positivity for savers, there is some hope for the future. Whilst inflation is expected to rise further in the next few months, with some predicting it will go above 3.0% before the end of the summer, it is unlikely to grow beyond this and is forecast to decrease once again towards 2.0% during 2018.

Please note that you should always seek professional advice when making saving and investment decisions and you should be aware that it is possible that some products may contain high levels of risk such that you may not get back all the money invested.

Sources
https://www.bbc.co.uk/news/business-39337909
https://www.heraldscotland.com/business/15179581.Can_you_protect_your_money_when_inflation_is_on_the_rise_/
https://moneyfacts.co.uk/news/savings/negative-interest-a-reality-as-inflation-bites/