Inflation warning: Savers urged to lock their money away to stop it ‘losing value'

With the Bank of England base rate currently at 0.1 percent and inflation having risen by 4.2 percent in the 12 months to October 2021, the money left in basic savings accounts that track the base rate are most likely to be losing buying power over the long-term. Almost 50 percent of people risk seeing their hard-earned savings lose value over time because they don’t understand how inflation affects their money according to new research.

Inflation is a measure of the rise or fall in the cost of goods or services. If goods or services increase in price, the same sum of money will buy less over time, eating into people’s spending power.

To combat this, savers need to make sure their funds are growing at the same rate as – or faster than – inflation, experts suggest. spoke exclusively with Martin Lawrence, director of investments at Wesleyan Group about the effects of inflation.

He said: “Inflation is very much a hot topic at the moment and many of us know it will impact the pounds in our pocket as the cost of living rises.

Inflation warning: Savers urged to lock their money away to stop it ‘losing value'
© GETTY Inflation

“What fewer people realise is the longer-term impact inflation can have on their savings.

“Keeping cash in savings accounts during a period of rising inflation and low interest rates, such as we have now, means your money is in effect losing value.

“If you can lock your money away for a minimum of five years, then it’s worth thinking about investing in stocks or investment funds, which give savers a fighting chance of beating inflation.”

Their data found 47 percent of UK adults aren’t sure what inflation is, while nearly 57 percent aren’t aware of how it will affect their cash.

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It’s important for Britons to understand what inflation is if they wish to keep their money growing in value.

Despite investing being a main way that Britons can potentially beat inflation, only 13 percent of adults had invested their savings in stocks and shares, where their money could have a stronger chance of securing real-term growth.

This low percentage just highlights that fact that not many people know the real impact of inflation, and the benefits that investing may have.

He went on to discuss what investment options people can look in to if they wish to try and beat inflation.

Inflation warning: Savers urged to lock their money away to stop it ‘losing value'
© GETTY Inflation

He said: “For those who want to invest in stock markets but don’t have the expertise, investing in a ‘multi-asset’ fund could be a good starting point.

“A Wesleyan With Profits ISA, for example, enables people to invest in our With Profits Fund rather than having to invest in individual companies or assets, and the financial returns are also ‘smoothed’ to reduce the impact of any market volatility on your money.

“A fund is managed by a dedicated, professional Fund Manager whose job is to achieve the strongest possible financial returns for all its investors.

“Importantly, for anyone investing in a fund via an ISA, there’s no requirement to pay capital gains tax or income tax on your investment returns.”

He stressed that Britons remember the value of investments. When investing, income received can go down, as well as up, and capital is at risk.

With 38 percent of savers unaware that investing could help protect their savings from the effects of rising inflation, Mr Lawrence gave an example to help people understand the true impact.

He explained that £100 kept in the highest-interest easy access account on the market, which currently pays 0.65 percent interest, would only be worth £72.16 in 10 years’ time in real-terms, if inflation reaches four percent and stays there.

The research done was to warn Britons of inflation and how people should think about making active steps to change what they do with their money.

People should speak to a financial advisor before getting into things they do not understand.

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