Inflation gap can be closed with IFISAs
The average annual UK salary would need to increase by £3,000 in order to keep pace with inflation in 2023, according to peer-to-peer real estate investment platform, easyMoney.
New research from easyMoney showed that pay rose by 6.3 per cent last year to reach an average of £33,402 per year. However, this was beaten by inflation, which rose by 9.1 per cent.
The analysis said that based on the average rate of inflation for so far, the year-on-year increase would be a further nine per cent by the end of the year.
In order to match this increase with a nine per cent rise in earnings, the average salary would have to increase by £2,992 to reach £36,394 by the end of the year, easyMoney said.
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“Rising inflation is reducing the spending power of the pound and making everyone in the UK worse-off. On top of that, wage growth simply isn’t keeping pace, making the situation even worse,” said Jason Ferrando, chief executive of easyMoney.
“With the economy as it is, many businesses and employers are reluctant to give sufficient pay rises because they’re already concerned about surviving this period of financial stress. As such, those who are lucky or savvy enough to have some savings squirrelled away might want to look at using it to invest.
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“Interest rates are climbing and while not every financial institution is passing this benefit onto savers, there are many avenues that are providing strong returns that could go some way towards easing the pressures of low pay and high inflation.”
One of the avenues, easyMoney suggests, is opening up an ISA investment, in particular, an alternative ISA such as an Innovative Finance ISA (IFISA) as it can provide strong returns.
“An IFISA enables you to use your personal ISA allowance to invest in P2P lending and can generate really strong returns,” easyMoney said.
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Earlier this year, research conducted by Peer2Peer Finance News found that by the end of February 2023, a fully diversified IFISA portfolio spread across all 41 available providers would return an average of 8.83 per cent, according to the target returns stated for the 2022/23 tax year.