Inflation fear strikes across the generations

Two thirds of people fear an inflation hit to their finances and the elderly are deeply concerned about soaring energy costs, new research reveals.

The headline rate of inflation soared to 5.1 per cent in November, and a further cost of living squeeze is forecast in the coming months, particularly when it comes to energy bills.

Some 40 per cent of adults describe themselves as concerned and 24 per cent as very concerned about the challenges they might face as a result, according to the survey by financial services firm Aegon.

Inflation fallout: Many people are worried about the rising cost of living 

Middle aged people are the most anxious about inflation overall, with 70 per cent in the 43-56 age group expressing concern.

Women are more bothered than men, with 67 per cent versus 61 per cent saying they are worried about rising prices.

>>>How can you protect YOUR cash against inflation? Find out below

Among the older generations, some 61 per cent of people aged 57-75 are nervous about inflation, and 58 per cent of people aged 76-plus.

But concern is likely to deepen among elderly people on a fixed income, should the rate of price increases continue to outstrip the 3.1 per cent rise in the state pension due this April.

This follows a row over the Government’s decision to suspend the ‘triple lock’ guarantee on state pension increases this year. 

Under the triple lock, the state pension is meant to increase every year by the highest of price inflation, average earnings growth or 2.5 per cent. But this was scrapped for one year because wage growth was temporarily skewed to more than 8 per cent due to the pandemic.

The Aegon survey found that when it comes to inflation, elderly people are most exercised about rises in energy bills.

Some 80 per cent of people aged 76-plus are worried about the cost of keeping their homes warm, against 65 per cent of people overall, with no disparity between women and men on this count.

Former Pensions Minister Baroness Altmann, who led an unsuccessful House of Lords revolt against the Government’s suspension of the triple lock, has called for an emergency winter manifesto to help older people with energy bills. 

‘With the lowest state pension in the developed world and older people needing to keep warmer than the young, the costs of home heating and basic bills mean that the elderly tend to succumb to bad weather in large numbers, even in a normal year,’ she says.

Aegon, which surveyed 2,000 adults in December, also asked people about other kinds of fallout from the rising inflation rate, and found around one in three are concerned about the decreasing value of their cash savings.

However, this rose to nearly half among the 57-75 and 76-plus age groups, who are more likely to have built up wealth than younger generations.

Around one in three people are worried about inflation hampering their ability to save, but in this case younger people are far more likely to fret about it.

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Some 67 per cent of 18 to 20-year-olds are concerned about this issue, but just 27 per cent of people aged 76 and above.

‘With inflation rising to its highest rate since 2011, many individuals are facing a cost of living crisis as prices surge,’ says Steven Cameron, pensions director at Aegon.

‘Undoubtedly, those on a fixed income face a tricky time ahead, and these include pensioners who will be significantly impacted with a sizeable gap between the current 5.1 per cent inflation level and the much lower 3.1 per cent used to calculate next year’s state pension increase.

‘Despite the Bank of England raising interest rates in December to 0.25 per cent, any of this increase passed on to savers is likely to outweighed by inflation decreasing purchasing power.’

What should you do if you’re worried about inflation? 

‘While inflation can’t be completely avoided, those concerned about the impact on their finances should think carefully about how they spend money on non-essential goods and services, particularly those which have jumped in cost over the last year,’ says Cameron.

‘A sustained period of high price rises should set alarm bells ringing for those with large amount of money sitting in cash savings which they’re unlikely to need in the shorter term.

‘It may be worth considering putting cash savings that are unlikely to be needed for the next five years or so into investments.

‘Investments such as in stocks and shares Isas or pensions can benefit from growth which can outstrip the rising prices of goods and services, although this is by no means guaranteed as the value of any investment can go down as well as up.’

Our tips for savers on how to make the best of a bad situation are here. 

If you are interested in investing, you can find tips on how to get started and suitable funds for newbies here. 

Investors who want to cash in on rising inflation can explore some options here. 

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