Jenny Holt, Managing Director for Customer Savings and Investments at Standard Life, comments on 10.5% December CPI.
“Inflation isn’t going away quickly, running to double-digits for the fourth consecutive month, and with the cost-of-living crisis entering a second year the impact on household savings has started to kick-in, in earnest.
“Even if, as forecast, inflation subsides gradually through the year and annual inflation for 2023 comes in around 7%- well below the current level- £10,000 saved in a best buy easy-access cash-based savings account today, earning 3% interest, would be worth around £9,580 in real terms by next January. This in anyone’s money is a significant loss of purchasing power at a time when many household staples are also doubling in price.”
| Impact of annual inflation on £10,000 | ||||||||||
| Year | 2% | 3% | 4% | 5% | 6% | 7% | 8% | 9% | 10% | |
| 1 | £ 10,094 | £ 9,991 | £ 9,888 | £ 9,785 | £ 9,682 | £ 9,579 | £ 9,476 | £ 9,373 | £ 9,270 | |
| 2 | £ 10,189 | £ 9,982 | £ 9,777 | £ 9,575 | £ 9,374 | £ 9,176 | £ 8,979 | £ 8,785 | £ 8,593 |
*The above table is based on savings of £10,000 earning 3% interest in an easy access cash-based savings account
“These figures highlight the importance of ensuring your savings are working as hard as possible for you. For those able to take a longer-term view, putting cash into investments via an ISA or pension provides the potential for returns that can match- or even beat- inflation over the longer term as well as additional tax efficient benefits.”
