Inflation: Mansfield resident says we’re ‘living in fool’s paradise’
Get pensions news and advice plus latest money alerts for FREE now
We use your sign-up to provide content in ways you’ve consented to and to improve our understanding of you. This may include adverts from us and 3rd parties based on our understanding. You can unsubscribe at any time. More info
Inflation has surged to 5.4 percent, its highest level since the early-Nineties. The rocketing inflation rate is creating a cost of living crisis while also eroding any savings left in cash. Inflation in the UK hitting is leading to a general expectation that the Bank of England will raise interest rates again next month.
A Freedom of Information request conducted by the LCP consultancy said that more than 14 million people have an average of £12,442 in cash Isas.
These accounts typically pay an interest rate of less than one percent which means at least 4.4 percent of the real value will be lost.
Data reveals that the average person will lose £547 this year to rising inflation.
Nearly a million people have more than £50,000 in their cash Isas, which means they could lose a minimum of £2,200.
The rate of inflation is rising in the UK (Image: GETTY)
Rishi Sunak is set out warnings of a rise in inflation (Image: GETTY)
The findings reveal that pensioners will take a £3.8bn hit this year alone.
This is because the over-65s have twice as much in cash Isas as their younger peers.
Inflation will knock £1,100 off the real value of the average cash Isa balance of pensioners, which stands at £25,383.
Sir Steve Webb, a former pensions minister and now a partner at LCP, warned that money from large swathes of the population was “sitting rotting” in cash Isas.
Speaking to the Daily Telegraph he said: “Inflation is like a tax on savers.
Inflation surge could be disaster for savers [INSIGHT]
Pensioners face ‘toughest struggle’ as inflation soars to 5.4% [REPORT]
German economy on the brink as highest inflation rate in 18 years [INSIGHT]
Bank of England may raise interest rates (Image: GETTY)
“Pensioners need to consider urgently whether keeping their money in these cash accounts is the best way to protect their savings.
“This is especially when the real value of their state pension is also being squeezed.”
Retirees will be dealt a double blow as in April the state pension will rise by 3.1 percent which is far below the current rate of inflation.
Speaking to the Daily Telegraph, Myron Jobson of Interactive Investor, stated that those putting money aside could invest in the stock market and generate higher returns to beat inflation.
Mr Jobson said: “Stock markets can be volatile and you have to be prepared for bumps.
“However, they have a knack of delivering inflation-beating returns over long periods of time.”