Rising inflation will cut the spending power of millions of pensioners

A recent Freedom of Information (FOI) request by London based pensions consultancy Lane Clark & Peacock (LCP) has found that high inflation rates will cut the total spending power of UK pensioners by more than £3bn in cash savings in the next year.

UK inflation figures currently stand at 5.4% (CPI; December 2021).  Those in the over 65s bracket, with a cash ISA (with a 1% interest rate) stand to lose 4.4% of their spending power over the next 12-months.

Currently, there is £87bn held by pensioners in cash-ISAs, which implies a massive £3.8bn hit in one single year on the real value of pensioner savings for those who hold all their ISA savings in cash. Broken down, this is an average loss of over £1,100 in spending power per pensioner in the next year.

The data shows that 3.4m of over-65s held an average £25,383 exclusively in cash ISAs, with females (in this age range) slightly more likely (than their male counterparts) to have large cash-only balances, with 293,000 women keeping £50,000 or more in cash, compared with 273,000 men.

“As part of a holistic financial plan, it is prudent to hold an appropriate amount of money in cash for several reasons. However, holding too much in cash can have a detrimental impact on a client’s overall portfolio” says Joe Carey Independent Financial Adviser

“With rising inflation and low cash ISA interest rates, savers can lose significant purchasing power of their hard-earned savings over time. Older savers need to seriously consider if holding their life savings in cash is right for them or if a regulated investment at an appropriate risk level, which has the ability to beat inflation, is a more suitable option”

The information provided must not be considered as financial advice.

We always recommend that you seek financial advice before making any financial decisions

Stocks & Shares ISAs do not include the same security of capital which is afforded with a Cash ISA.  You may get back less than the amount invested.

*FOI request courtesy of Steve Webb, Partner at LCP and former Pensions Minister



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