Data presented by the Office for National Statistics shows that the Consumer Prices Index (CPI) rose by 5.1% between November 2020 and November 2021, this is one of the largest CPI 12-month rates since September 2011, when the rate stood at 5.2%(1).
Inflation is the increase in price for a basket of goods. The price of this basket tells us the overall price level within an economy and the rate of change is known as the Consumer Prices Index (CPI). The Bank of England’s Monetary Policy Committee (MPC) manage CPI by setting through quantitative easing and bank rates and aim to keep a stable CPI rate of 2%(2). Generally, within a well-developed economy, 2% is seen as a stable and healthy rate of inflation, though inflation can also result in our money not going as far as it used to.
One of the most notable contributors to this higher inflation rate is the easing of COVID-19 restrictions(3); as people go out and start purchasing the supply side of the market could not keep up with the demand for products, which in turn has caused prices to increase. There has also has been a marked increase in the price of oil, again due to post-lockdown demand. An increased price for a barrel of oil results in a higher price to transport goods, to make goods and so on which results in your products becoming more expensive.
The Bank of England estimate inflation to reach a high of around 6% this Spring, but then for rates to start to stabilise in the latter stages of 2022(3).
With inflation potentially reducing your spending power in the future it is essential to connect with industry professionals to combat this risk and put your money to work in order that you meet your retirement goals.
Have you considered how inflation will affect your required retirement income? If not, your current plans for retirement may not meet your needs and you could end up not living out your desired retirement lifestyle.
As part of our financial planning model, we always review your investments with your long-term goals at the forefront of your plan. The road to retirement is not a straight one, but one that must be flexible and tailored to your needs, risk, tax status, and your objectives.
When investing, capital is at risk. The value of investments can fall as well as rise. You might get back less than you invested. You should only consider these products if you are willing to take some risk with your capital. We will consider whether such products are suitable for you before recommending an investment.
Scott Fyffe Wealth Management Ltd is an Appointed Representative of Lyncombe Consultants Ltd which is Authorised and Regulated by the Financial Conduct Authority No 618025.
Scott Fyffe Wealth Management Ltd is registered as a company in Scotland SC669958. Registered Office Unit 9C City Quay, Camperdown Street, Dundee, DD13JA, Scotland, UK.