Research from pensions and retirement specialist LV= highlights how rising inflation is affecting UK consumers.
The LV= Wealth and Wellbeing Monitor* - a quarterly survey of 4,000+ UK adults – reveals:
People with rising living costs say they are adopting a variety of ways to make ends meet
Inflation is eroding the value of consumers’ savings but many are worried about moving their savings into higher-risk investments
LV=’s research indicates that a significant minority of people are unaware how inflation affects their savings;
Increased cost of living may cause those in retirement to withdraw more of their pension savings each year than originally planned. Savers who draw down a larger income from their pension run the risk of exhausting their pension fund, depending on their pension’s growth rate. The table below shows how a £200,000 pension fund could last 28 years if £12,000 a year is withdrawn, or 15 years £18,000 a year is withdrawn. (Figures assume 4% growth rate)
|How long will a £200,000 pension fund last?
|Annual growth rate
|Number of years before pension runs out
“The LV= Wealth and Wellbeing Monitor provides highlights how rising prices are squeezing the incomes of millions of people.
“Inflation fears have been rising since summer and rising prices pose a problem for retired people. Those on fixed incomes will see the purchasing power of their incomes fall. Those drawing an income from their pension fund may be forced to withdraw more money from their pension fund than they anticipated and increase the risk of running out of funds in retirement.
“Rising fuel bills mean many are making cutbacks to other areas of expenditure while many are dipping into savings, taking on extra debt or borrowing from family to make ends meet.
“One of the big issues people now face is how to also protect the future spending power of their savings being eroded by rising prices. This is especially true if they keep their money in savings accounts and are reluctant to invest in what have typically higher returning stock-market investments because they fear volatility.
“One solution could be smoothed investment funds that are designed to reduce the volatility of investment markets and produce real returns that over the long-term. The best option is to consult a financial adviser who will be able to identify the most suitable funds.”
* The LV= Wealth and Wellbeing Monitor is a quarterly survey of 4,000+ consumers which examines their attitudes to spending, saving and retirement. LV= surveyed 4,000+ nationally representative UK adults via an online omnibus conducted by Opinium in March 2022.