Inflation to Erode Savings by £1.5 Billion in 2017

KLOFinancial | 7 years ago

Rises in inflation in 2017 are to erode cash savings in the UK by around 1.5 billion this year, according to Blackrock.

For the first time this year, inflation has fallen by 0.3% to 2.6% in June. According to Blackrock, in 2017 so far, inflation has eaten away at savings by £760 million. If this trend is to continue at the average 2017 has seen so far, this would mean this figure could double by the end of the year.

Blackrock also polled 4,000 people in the UK in their Investor Pulse survey and found that the typical saver in the UK has around £8700 in cash with around a quarter of this set aside for the long term. This would mean that the typical long-term savings in the UK would lose around £55 this year thanks to inflation.

This continued at the same rate over 20 years would result in the typical pot of long-term savings being eroded by around £870. This would cost the UK’s savings over £20 billion, based on the average annual inflation rate of 2017.

Blackrock mentioned that it was encouraging to see so many people in the UK setting aside a quarter of their savings for the long term, but noted that there was an “emotional barrier” that would stop people taking the leap into investment.

Blackrock also mentioned that if a UK saver was to invest this pot of long-term savings into the FTSE All Share for the last 20 years, it would now be worth £8,350.

What should I remember?

The value of investments can go down as well as go up, meaning that anyone who is considering going down the route of investing is aware of the risks involved and is comfortable.

It’s also important when considering financial goals to take into account the level of growth that is required to achieve the goals that are set out. These will need to take into account the impact of inflation as well.

What next?

If you’re looking for financial advice regarding inflation’s effect on investing, talk to our financial advice team. Please call on 01926 492406 or email enquiries@klofinancialservices.com to make an appointment.