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London,
13
February
2018
|
11:28
Europe/London

Inflation blow to the tune of £23.5bn for households across the UK, while retirees income halves in 20 years

Andrew Tully, pensions technical director, Retirement Advantage
With wage growth stagnant, and inflation predicted to remain close to recent rates in the short term, the squeeze on living standards will continue.
Andrew Tully, pensions technical director, Retirement Advantage
  • UK households will collectively need to find an extra £23.5bn1/2 to maintain standard of living
  • Retirees spending power halves in 20 years if inflation averages 3%2/3

The latest data shows UK inflation (CPI) grew by 3% in January 2018, unchanged from December 2017. This rate of inflation leaves UK households collectively needing to find an extra £23.5bn a year to maintain their standard of living compared to 12 months ago, according to Retirement Advantage.

Each household will typically need to spend an extra £864 a year to maintain their standard of living compared to a year ago.

Andrew Tully, pensions technical director, Retirement Advantage said: ‘Inflation is the hidden force that can wreak havoc with household budgets and retirement plans. The latest numbers will leave people reeling and will hit living standards as we will all need to find that little bit extra to make ends meet.

‘With wage growth stagnant, and inflation predicted to remain close to recent rates in the short term, the squeeze on living standards will continue.

‘For people living off a fixed income in retirement, inflation of 3% will halve spending power in just 20 years. Recent market turmoil has shown that using drawdown to deliver retirement income is not without risk and a strategy that creates breathing space when markets take a wobble and helps mitigate the effects of inflation is the ideal. The new retirement accounts do just that by delivering the flexibility for people to bank a guaranteed income and leave money invested to pay for life’s little luxuries.

‘People need a plan and a professional financial adviser can help decided the best course of action.’

Impact of inflation on retired households who currently spend £396.35 a week, the average household expenditure for over 65s2/3

Average inflation of

Future value in 10 years

Future value in 20 years

2%

£325.31

£266.87

3%

£295.07

£219.56

Boilerplate
  1. Source: Statistics Consumer Price Index (January 2018).
  2. Source: Retirement Advantage calculations based on the ONS Detailed household expenditure by age of household reference person 2017 https://www.ons.gov.uk/peoplepopulationandcommunity/personalandhouseholdfinances/expenditure/datasets/detailedhouseholdexpenditurebyageofhouseholdreferencepersonuktablea11
  3. Source: Retirement Advantage