Mark Soper – RetireEasy

It was announced today that the Government’s CPI measure of inflation increased by 3.5% in March, approaching double the Bank of England’s target of 2.0%. Food and clothes were cited as the main culprits, so bad news for retirees.

In the distant past it was heard among savers and investors that ‘a bit of inflation is OK’ and this was because former Government’s tended to treat inflation with a blunt instrument called interest rates. An increase in interest rates was good for bank deposits and , stock markets often rallied and annuity rates improved. These fundamentals are long gone and we are getting used to a new term ‘stagflation’ where the economy recedes or hardly grows whilst inflation increases.

This type of inflation is bad news for retirees as bank deposit rates remain low and stock markets are weak. Whilst the Government has recently announced above-inflation increases in State Pension, this stagnant but inflationary cycle continues to eat away at retirees’ savings.