11.1pc inflation heaps pressure on savers and borrowers

The consumer prices index (CPI) rose by 11.1 per cent in the 12 months to October 2022, piling more pressure on savers and borrowers as the cost of living crisis continues.

Inflation is now at a 41-year high, driven largely by rising gas and electricity prices, as well as the higher cost of food and non-alcoholic drinks.

The latest CPI figures mean that there is not a single savings account in the UK which is currently able to keep pace with inflation, while borrowers face the prospect of paying higher rates on their loans in the near future.

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Financial experts have warned savers to be aware of the impact that inflation can have on their nest eggs, and to consider investing rather than relying on cash savings alone.

“High inflation is bad news for savers who are looking for a decent return on their cash,” said Alice Haine, personal finance analyst at DIY investment platform Bestinvest.

“For those with a longer-term savings plan, the troubling economic environment might deter some people from increasing their pension contributions or upping their investments. But making cuts today to preserve cash for short-term needs can jeopardise financial futures.

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“Yes, cash savings are important because everyone needs a rainy-day fund, but when you invest in the financial markets, you are sending your money out to work on your behalf and over the long this has the potential to deliver an inflation-beating return.”

Rachel Springall, finance expert at Moneyfacts.co.uk, said that “it is essential savers consider both their ISA and their personal savings allowance” before committing to any new cash savings plan.

Springall urged savers to switch their account if they are not getting a high enough return, and to consider placing their money with alternative financial services providers, rather than sticking with “the more familiar household names”.

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