Investment - Articles - Comments as inflation falls to its lowest rate in two years

Standard Life and PensionBee comment on inflation data published this morning by the Office for National Statistics (ONS), which shows a significant fall to 4.6% in the Consumer Prices Index (CPI) measure of inflation in October, down from 6.7% in September and less than half of the peak a year ago in October 2022 of 11.1%.

 Inflation falls below best-buy cash savings rates: Dean Butler, Managing Director for Retail Direct at Standard Life, part of Phoenix Group said: ‘It’s just eight months since inflation was in double-digits and the continued fall is good news for struggling UK households. It also means those who are thinking about how to make the most of their money now have the opportunity to make a return on their cash that exceeds inflation for the first time in many years. There are even a couple of easy-access accounts currently offering rates above 4.6%.
 “With further increases to the base interest rate perhaps unlikely, it’s possible that the best saving rates on offer have peaked so you may need to act fast to secure a good deal. While rates are high, cash ISAs are an attractive option as you won’t pay any tax on the interest you earn. Rumours of a shake-up of the ISA regime at next week’s Autumn Statement also make this a space to watch closely.
 “However, for those in a position to do so, investing money rather than keeping it in cash traditionally offers the potential for higher growth in the long run. If you’re earning 5.5% interest and inflation falls further to 4%, returns won’t be huge with £10,000 being worth £10,258 after two years. If you’re able to take a longer-term view, saving into your pension offers both tax efficiency and the potential to benefit from compound investment growth.”

 Becky O’Connor, Director of Public Affairs at PensionBee, said: “A fall in inflation of this scale is sorely needed. Such a drop could mark the beginning of the end of the cost of living crisis, although prices are still high and the painful effects of this difficult period will continue to be felt for some time.

 “For those trying to preserve the long term value of their life savings, including their pension, returning to lower inflation is absolutely vital. Retirees have been struggling to make their pensions last in the face of the recent bout of ultra-high inflation; while workers trying to boost their future pension pot have faced an uphill battle to maintain the real future value of their savings. A return to more normal economic conditions will be a boost to financial resilience and security and may enable people to start reprioritising planning, rather than just getting by.”

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