Brits at a loss over how to fight inflation
London, April 7, 2017
- More than a third of savers don’t know how to escape rising tide of inflation
Millions of Britons could see their savings shrink as they don’t know how to shield them from rising inflation, according to research for leading pension provider Zurich.
Figures from the Office for National Statistics' Consumer Prices Index (CPI) show inflation soared to 2.3% last month, its highest level since September 2013.
But research by YouGov for Zurich found more than a third (37%) of people aged 18 to 65 plus are in the dark over ways to grow their savings enough to at least keep up with rising prices.
Alistair Wilson, Zurich’s Head of Retail Platform Strategy, said, "Rising inflation is eating away at the nation’s savings - yet the reality is many people don’t know how to fend it off.
"A gap in consumer awareness over how they can protect their savings from inflation could mean many people will see their wealth simply drain away.
"Over the long-term, this threatens to leave people financially worse off in retirement, especially when combined with ultra-low interest rates and stagnant wage growth.”
Of the 4,000 people surveyed by YouGov, more than a quarter (27%) said they believed property was the best way to outpace inflation.
More than one in 10 (13%) people thought cash ISAs could help them maintain their spending power – twice as many as those who said stocks and shares ISAs (7%).
Just 4% of people said investing in the stock market could help outstrip inflation, while only 3% backed savings invested in a pension.
“Although they come with more risk, stocks and shares ISA typically offer better protection against inflation than cash ISAs,” Wilson said. “Despite this, twice as many people are likely to shelter their money in cash ISAs.
“Cash ISAs are an excellent way to save money for a rainy day but are less suitable for long-term savings, such as for retirement.
“From April, the amount people can shelter tax-free in a cash ISA will rise from £15,240 to £20,000 a year.
“With a bigger ISA pot to fill, the danger is that people will leave more of their long-term savings stuck in cash, where they will be eaten away by inflation.
Wilson said that people saving for the long-term should consider other options to protect their long-term savings, in particular pensions.
“If you are putting money aside for the long-term, a workplace pension is one of the best ways to grow your savings, and prevent them from being eaten away by inflation.
“Not only do you receive a top-up from the Government in the form of tax relief, your employer is also likely to put money into your pot, which can help turbo-charge your savings.”
Three simple steps you can take to help beat inflation
1.Shop smartly – make sure you are doing research before making a purchase and see whether there are any discount codes available
2.Consider investing in stocks and shares ISA rather than a Cash ISA, especially if you don’t need to access the money in the short term. Even though there is higher risk, the potential returns are much higher
3.Don’t forget to top up your workplace pension – not only do you potentially benefit from matched employer contributions, you received tax relief and are better placed to protect your savings from short term market fluctuations