The upsurge in inflation over the last year or so has again vividly highlighted the devastating impact sharply rising price levels can wreak on people’s finances. Carefully reviewing your financial choices now, though, can ensure you continue making appropriate decisions that will help to stop inflation leaving a lasting impression on your financial future.
A lack of understanding
Official statistics show the headline rate of inflation peaked at a 41-year high of 11.1% last October but, although economists expect it to continue falling for the rest of this year, the rate has so far remained stubbornly high. Research (Aviva, 2022), however,
suggests the impact inflation has on our finances is not widely understood, with over half of UK adults failing to grasp how rising prices eat into the buying power of their savings.
Limiting the damage
Inheritance is another area where high inflation can have a profound effect. When combined with the continuing nil-rate threshold freeze, soaring prices inevitably mean more estates are likely to be dragged into the Inheritance Tax net. Careful planning now, though, can limit any future liability and preserve people’s ability to pass on assets to their heirs.
Retirement provision is also a concern, with growing evidence that cost-of-living pressures are leading some to cut back contributions as a way to make ends meet, without realising the lasting damage such decisions can make. For instance,
Analysis (Standard Life, 2023) based on various assumptions (about such factors as salary, pension contribution rates and investment growth) shows that if someone opts out of pension contributions for five years in their 20s it could reduce their final retirement pot at age 66 by £114,000.
Here for you
As ever, we’re here to help; so please get in touch if you need to review your finances and, together, we’ll plan to mitigate inflation’s impact on your future financial wellbeing.
The value of investments and income from them may go down. You may not get back the original amount invested. A pension is a long-term investment. The fund value may fluctuate and can go down. Your eventual income may depend on the size of the fund at retirement, future interest rates and tax legislation.