Inflation in UK 10 year high

Inflation hits a 10-year high - what could the impact be on your savings?

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Considering the economic turmoil caused by the Coronavirus pandemic, some savers are perhaps understandably continuing to seek safe havens for their money. In times of trouble, cash is traditionally seen as offering capital security over other assets namely, shares, fixed interest, and property. However, savers still need to apply caution. Even in 'normal' times it is common for people to feel the need to retain cash. Bank and building society accounts are the ideal place for your immediate savings and emergency money as they are easily accessible and tend to be the safest place to put your money. Some people hold high cash balances, perhaps to meet capital expenditure in the short term or just to provide extra peace of mind, but there are unseen risks to holding high levels of cash - inflation.

With the headline annual Consumer Prices Index (CPI) rate of inflation has now risen, to 5.1% in the 12 months to November, up from 4.2% the month before, which is now at its highest level for over 10 years! Clearly this will have an impact on us all. Higher transport and energy costs in particular have had a big impact on inflation, which was also above the predicated 4.7% increase, the Office for National Statistics (ONS) said. This has prompted The Bank of England to raise interest rates for the first time in more than three years, in response to calls to tackle surging price rises.

Rising inflation continues to represent a challenge to savers, who must at the very least aim to beat it to prevent their money from losing value in real terms. The current challenge is made even trickier by the fact that current savings rates are so low and, with inflation at its current levels, it is currently impossible to find a deposit-based account that can beat inflation.

So how can cash savers hope to bridge the gap? The answer may be to invest in 'real assets' such as shares, fixed interest, and property.

But is this a good time to invest? It`s all too easy to get caught up with some of the news we regularly hear about financial markets. The key factor however is not about when to invest but rather the amount of time you invest for.

Many people believe that knowing when to buy and when to sell is the secret of successful investing. The truth is that no one knows with certainty when investment markets will rise or fall. Trying to time the investment markets is not only stressful, it is very seldom successful. Leaving funds invested for the medium to long term, for those who can afford to do so, usually produces the best returns.

When markets are volatile it`s a big temptation to put all your investments in the relative security of cash. It may seem like a safe haven, however as they say, a ship is safe in harbour, but that is not what ships are made for. We have produced “Our Guide To Investing” to help you understand, whatever your knowledge and experience, the principles of investing to allow you to make informed decisions. Investing money is an important decision and you need to consider a number of issues before committing your money, but with a clear understanding of how your investments work it needn’t be something to fear.

Armstrong Watson Financial Planning & Wealth Management, as well as providing Independent Financial Advice and personalised investment planning also offer a bespoke `cash management` service aimed at maximising interest rates by identifying the most competitive cash accounts, whilst ensuring clients` savings are afforded full FSCS protection.

Past performance is no guarantee of future performance. The value of investments can fall as well as rise and investors may not get back their original investment.


For savings and investment advice please get in touch with James Marlow, email james.marlow@armstrongwatson.co.uk or call 0808 144 5575

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