Inflation: Expert discusses Consumer Price Index rise of 2.1%
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Inflation has risen to 2.1 percent, rising above the Bank of England’s target for the first time in nearly two years, with alcohol, clothing and housing prices all contributing to the increase. In light of this, many financial experts have issued warnings on how the nation’s savers and retirees will be hit by increasing costs.
Jason Cozens, the Founder & CEO of Glint, broke down how rising inflation is a global issue which consumers should be concerned about if they aren’t already.
He said: “Inflation is out of control. Consumers should be deeply concerned about continued rising costs throughout the rest of 2021 now that the Bank of England’s inflation target has already been surpassed – especially as there is no sign of any improvement on the record low interest rates currently hurting consumers and savers.
“Rising inflation is a global problem. It’s at its highest levels since the financial crisis in the US, hitting 5 percent up from just 1.5 percent in January. Similarly, production prices in China are at the highest level since 2008, up nine percent in a year – consumers will face a huge hike in prices if these increased production costs are passed on.”
“Unfortunately, consumers are hit by a perfect storm of factors that collude to erode the value of our cash and savings.
“In addition to spiralling inflation and minuscule interest rates, the continuation of quantitative easing – around £900bn since the financial crisis – and unprecedented levels of government borrowing – the UK’s national debt recently hit £2.17trillion or over 98 percent of GDP – ensure that the purchasing power of sterling continues to decline over time.
“These staggering figures are having a major impact on consumer wallets.”
Unfortunately, cash will not be the only financial casualty of rising prices.
Andrew Tully, a technical director at Canada Life, warned retirement spending power is also set to drop.
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He warned: “The last year has left many of us feeling the pinch as the impact of Covid has seen income drop for many people, with others facing up to redundancy.
“Today’s inflation news adds a further pressure as we continue to battle with bills going up and trying to balance household budgets.
“The rising costs of living can disproportionately affect people with fixed incomes, including retirees who typically live off pension income.
“Over the course of a 20 year retirement, if inflation averaged 2 percent, the typical retired household would need to find a further £187 a week to maintain their standard of living, an increase of 48 percent.
“Over a typical retirement the buying power of your income could halve if inflation averages two percent.
“Building some form of protection against the ravages of inflation is important if people want to maintain their standard of living.
“Very few people currently buy an inflation-proofed income at retirement. Using a combination of drawdown and annuity can create the flexibility for people to bank a guaranteed income to pay the bills while also leaving money invested to pay for life’s little luxuries and help protect against inflation.
“A professional financial adviser can help you decide the best course of action for your personal circumstances and ensure you stay on track to enjoy the retirement you have worked hard for.”
This will be hard news to bear for many retirees as recent research from Age UK highlighted pension poverty has reached unprecedented levels.
In examining the latest data from the DWP, Age UK warned the number of pensioners living in poverty has passed the two million mark.
This affects retirees of all backgrounds but Black and Asian older people are specifically at risk.
For those who need additional state support in their later years, benefits such as pension credit, attendance allowance and even Universal Credit can help with rising costs.
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