The Bank of England raised interest rates to 1.75 percent from 1.25 percent. Although it lags far behind the rate of inflation, it’s important for savers to know what this means for their money.
Express.co.uk M&G Wealth’s savings expert spoke exclusively to Les Cameron about the base rate rise.
He explained what this means for pensioners and how they can prevent their money from eroding.
Mr Cameron does not think the interest rate hike has come as a real shock to anyone.
He said: “As inflation continues to rise, an increase in savings rates means that for the majority of cash or cash savers, for example National Savings and Investments, their money is being eroded in real terms.
“Many of those with cash savings are retirees, who spend a high proportion of their savings on energy bills and are likely to feel the consequences given sky-high energy prices.”
Households’ annual energy bills could rise in the coming months, it has been warned.
Ofgem is expected to announce an increase in its October price range next week, which could see energy bills hit a staggering £3,582 a year for average households.
As the cost of living crisis continues, Britons are being urged to ensure they get all the help they can, particularly pensioners.
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He continued: “As the cost of living rises, the erosion is taking a toll on people’s savings, and those with non-fixed-rate mortgages may feel the brunt of the rise more than others. .
“Staring down the barrel of potential double-digit inflation means it’s now more important than ever to reassess your finances and ensure your savings can meet future challenges.
“Getting professional financial advice can be a great place to star.”
Inflation currently stands at 10.1 percent, although experts warn that by October, the poorest fifth will experience inflation of 17.6 percent, while the richest will see a rate of 10.9 percent, according to the Institute for Financial Studies (IFS).
“It’s not as complicated as you might think, with different investments, you can spread the risk.
“Speaking to a financial advisor is always a wise choice and can ensure any investment choices are tailored to your circumstances.
“Those approaching retirement may consider maximizing pension contributions as they generate tax-advantaged income.
“For example, basic taxpayers put £80 into their pension and the government can top it up to £100.
“If you take £25 out of this tax and pay 20 per cent tax on the remaining £75, you have £85 – that’s a return of 6.25 per cent. It won’t beat inflation, but it will beat the bank.”
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