❓ How can you protect your money from rising inflation?
Experts believe once lockdown is eased, a wave of consumer spending could send inflation soaring.
High inflation can have a devastating impact on people's finances, so what to do?
~ a #thread 👇 telegraph.co.uk/money/consumer…
Experts believe once lockdown is eased, a wave of consumer spending could send inflation soaring.
High inflation can have a devastating impact on people's finances, so what to do?
~ a #thread 👇 telegraph.co.uk/money/consumer…
Savings boomed in 2020 👇
Economists believe that inflation will rise as Britain comes out of lockdown and pent-up demand in the economy is unleashed.
If they're correct, this could have a big impact on investors…
Economists believe that inflation will rise as Britain comes out of lockdown and pent-up demand in the economy is unleashed.
If they're correct, this could have a big impact on investors…
Bond owners could suffer most.
Investors sell bonds when inflation rises, as it eats into that income.
Higher inflation would also increase the likelihood the Bank of England raises rates – bad news as it decreases the relative value of bonds' payments vs newly-issued ones…
Investors sell bonds when inflation rises, as it eats into that income.
Higher inflation would also increase the likelihood the Bank of England raises rates – bad news as it decreases the relative value of bonds' payments vs newly-issued ones…
❓ So how can investors protect themselves?
By buying index-linked bonds, where interest paid rises with inflation.
Infrastructure and real estate investments also have contracts linked to inflation, so income and dividends rise as inflation does.
Gold could also rise…
By buying index-linked bonds, where interest paid rises with inflation.
Infrastructure and real estate investments also have contracts linked to inflation, so income and dividends rise as inflation does.
Gold could also rise…
❓ Can cash savings beat inflation?
Despite inflation currently standing at 0.7%, many high street banks are now paying as little as 0.01% in interest on their accounts.
On a balance of £50,000, this would earn just £5 a year…
Despite inflation currently standing at 0.7%, many high street banks are now paying as little as 0.01% in interest on their accounts.
On a balance of £50,000, this would earn just £5 a year…
❓ So what can you do?
Not much; no readily-available easy-access accounts currently beat inflation.
Locking your cash away for longer in a fixed-rate account can generate higher interest, but this would mean savers miss out if interest rates rise in the coming years…
Not much; no readily-available easy-access accounts currently beat inflation.
Locking your cash away for longer in a fixed-rate account can generate higher interest, but this would mean savers miss out if interest rates rise in the coming years…
❓ What about pensions?
Inflation can have an enormous impact on how long retirement savings will last.
Those with an annuity can see their income eroded every year if they've bought it at a fixed rate…
Inflation can have an enormous impact on how long retirement savings will last.
Those with an annuity can see their income eroded every year if they've bought it at a fixed rate…
According to @AegonUK, "level annuities" have been the most popular in recent years, as they pay out more cash from the beginning.
However, an inflation-linked annuity will start off with a much smaller income, but keep increasing over time 👇
However, an inflation-linked annuity will start off with a much smaller income, but keep increasing over time 👇
If inflation rises sharply, savers with a "defined contribution" pension will be forced to take on more risk to keep up.
However, high inflation could be a boon for tens of millions, as the state pension could get a bumper boost…
However, high inflation could be a boon for tens of millions, as the state pension could get a bumper boost…
❓ Does inflation affect house prices?
Inflation does pose a threat for the housing market, because it could push the Bank of England to raise interest rates.
Buyers would have less purchasing power because mortgages would become more expensive…
Inflation does pose a threat for the housing market, because it could push the Bank of England to raise interest rates.
Buyers would have less purchasing power because mortgages would become more expensive…
As Kay Neufeld of @Cebr_uk explains: "The psychological impact on the market could be big.
"There's a risk for anybody on a flexible rate or on a fixed term mortgage that's coming up for renewal" 👇
"There's a risk for anybody on a flexible rate or on a fixed term mortgage that's coming up for renewal" 👇
❓ What else do you need to know?
@Jessica__Beard, @Sam_Benstead, @MelissaLawford and @Will_Kirkman explain everything you need to know about inflation and your finances here: telegraph.co.uk/money/consumer…
@Jessica__Beard, @Sam_Benstead, @MelissaLawford and @Will_Kirkman explain everything you need to know about inflation and your finances here: telegraph.co.uk/money/consumer…
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