Inflation is a fact of life in every economy
Inflation happens as a result of things like the pressure on supply and/or demand, and even consumer expectations.
When inflation increases it reduces what your money can buy and your purchasing power. In 2022 UK inflation hit a 40 year high, in part due to the fallout of the coronavirus pandemic and the rising cost of energy.
And it’s not just the cost of day-to-day living that’s affected. Many won’t see their savings stretch as far and for those that are retired, this could mean having to dip into more of their pension pot than planned in order to maintain their standard of living.
“Inflation fears have been rising since summer 2021 and rising prices pose a problem for those in retirement. Someone on a fixed income will see the purchasing power of their income fall. Those withdrawing an income from their pension fund may be forced to take out more money than they anticipated – this could increase the risk of their funds running out in retirement.
“One of the big issues that people now face is how to also protect the future spending power of their savings from being eroded by rising prices. This is especially true if they choose to keep their money in savings accounts and are reluctant to invest in typically higher returning stock-market investments because they fear the ups and downs that come with an investment”.
*The LV= Wealth and Wellbeing Monitor is a quarterly survey of 4,000 people to understand UK consumers and their attitudes to their personal finances and wellbeing. The statistics shown here are as a result of the survey we conducted in March 2022.