This will add to already heightened concerns regarding loss of purchasing power from cash savings and fixed incomes. Individuals will be hoping that such high price rises are not sustained over the long-term to avoid the damaging effects of inflation being compounded.
Millions of people are already feeling the squeeze in the cost of living, particularly during a festive period when disposable incomes are often at their most stretched.
“Those holding large amounts in cash savings are particularly at risk from high inflation. While Omicron concerns are likely to defer a Bank of England increase in interest rates, any increase eventually passed on to savers is likely to be small and more than outweighed by inflation decreasing purchasing power.
“The other group particularly affected are pensioners on a fixed income. The state pension is due to increase by 3.2% next April, 1.9% less than where inflation is currently sitting.
“If last Christmas, you were given a generous £1000 present and put it in a savings account earning the average of 0.19% interest, you’d have effectively ‘given away’ £47 as its purchasing power today would be £953. However, if you’d invested it in the stock market, it would have grown to £1,097 which after inflation is still worth £1,044 today*.”
*Investment returns calculated by the increase in FTSE not allowing for any reinvested dividends and assuming a charge of 0.75%. The value of investments may go down as well as up and investors may get back less than they invest.
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