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  • Writer's pictureDarren Pestell

A Deeper look at inflation

Updated: Jul 10, 2023

With inflation at *5.5% and heading higher, quite simply, if you're saving for retirement your money is going to have to work harder to keep it's value

Let’s say you were planning to retire on savings of £100,000. If prices go up by 10% before you retire, you’ll need to save an additional £10,000 to have the same retirement you had planned for. This means you’ll either have to save more, look at investing to potentially grow your money, or delay retirement. Of course you could still retire with your £100,000 but there’s no getting round the fact it won’t be ‘worth’ as much in terms of what you can buy for your money.

As with any investment your money has the chance to go down as well as up and you may not get back what you put in.

If you’re already in retirement the opposite applies. Let’s say you already have a yearly

income of £10,000 and prices rise by 10%. In order to enjoy exactly the same standard of living your income will need to increase by 10%. And while some incomes from pensions, and the state pension do increase each year, many of these are unlikely to keep up with inflation.

Inflation brings another problem to those already in retirement. If you’re retired you essentially get hit twice. Not only is the purchasing power of your money reduced but if you are generally spending more time at home than when you were working, it’s likely to means an increase in energy bills (and we know that currently energy prices are rising) so inflation creates two issues, your money is ‘worth less’ and yet you are paying more for the cost of living.

Inflation is currently 5.5%, at that rate it would take a little over 12 years to halve the value of your money.

So how can you help combat the effects of inflation?

Investing gives your money the chance to grow which can help offset the effect of inflation. But the term investing can often put people off or it conjures up visions of high stakes and either winning big or losing everything. However, in reality there are many different ways to invest and many different levels of risk and reward so there are many ways your money can work harder for you. Isn’t it at least worth considering?

*Source ONS as at January 2022

If you’d like a review of your existing pensions, investments and financial strategy, please get in touch for a FREE initial consultation so we can build a plan together for your financial future.

Our services relate to certain investments whose prices are dependent on fluctuations in the financial markets beyond our control. Investments and the income from them may go down as well as up and you may get back less than the amount invested. Past performance cannot be used as a reliable prediction of future performance.

Your home may be repossessed if you do not keep up repayments on your mortgage.

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