Inflation rose to 5.4 percent in the year to December, the Office for National Statistics (ONS) said today in yet more bad news for Britons. The last time inflation was recorded as higher was back in March 1992, when it rocketed to 7.1 percent. State pensioners are already reckoning with a lower than expected increase to their sum come April as the triple lock mechanism has been temporarily scrapped.
Now, they will have to come to terms with the fact inflation is set to far outpace their planned increase.
The Government has confirmed the state pension will this year increase by 3.1 percent.
But with inflation continuing to rise, this essentially means pensioners will be losing out.
Colin Dyer, Client Director at abrdn financial planning, said: “With costs soaring for food, fuel and energy, as well as the uncertainty that the Omicron variant brought, it is no surprise that we are continuing to see inflation grow.
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“Today’s further increase will put even more pressure on the government to offer some respite to the millions of households facing a cost of living squeeze.
“State pensioners and those receiving benefits are in the spotlight with increases based on September’s inflation rate of just 3.1 percent.
“With inflation now approaching double that at 5.4 percent, it could be a case of one step forward but two steps back as state pensioners may see the coming April increase wiped out twice over in terms of their purchasing power.”
Indeed, as inflation soars to record levels, it is understandable many people are anxious about what will happen in retirement.
Britons may be wanting to take steps to protect their savings for later life and ensure the retirement they had hoped for.
However, the situation presents difficulties for retirees who are also facing a lower than expected state pension.
Emma Byron, Managing Director at Legal and General Retirement Solutions, said the situation would force many to reconsider how they can achieve a reliable source of income later on in life.
She said: “Managing money effectively does require sustained effort and attention, but a regular review of finances is important to ensure your plans for retirement don’t get blown off course.”
Ms Byron advised retirees to start with an audit of their personal finances, taking stock of their current situation to get an idea of what pressures inflation could put on money.
Next, she said, trying to maintain a cash buffer is likely to be key, with the usual rule of thumb set at three months’ worth of salary.
Britons should also be actively investing their savings and pension pot if they can possibly do so.
Ms Byron added: “Cash in the bank is likely to earn very little interest.
“It will lose value over time so check your money is working hard enough for you.”
Finally, individuals should review their household spending to see if there are any areas where they can make tweaks to help ease their finances.
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