Is inflation eating into your wealth?

Despite the efforts of the Bank of England, inflation is not going away.

In some areas, such as supermarket prices, it may be getting worse. The Consumer Prices Index rose by 10.4% year-on-year in February, an unexpected jump after three consecutive months of decline, according to the Office for National Statistics.

The Bank of England has raised interest rates 10 times in a row since December 2021 in a bid to bring inflation down. The latest hike saw it reach 4.25%.

But although you cannot escape either inflation or rate increases, there may be ways to limit the damage to your wealth and your financial plans.

What does rising prices mean?

High inflation makes it harder for people to afford basics like food and housing and almost impossible for businesses to plan for the future. If it runs out of control – as it did in Germany a century ago – it can destroy the value of money and cause economic collapse. 

The bank’s solution is to raise interest rates, making it more expensive to borrow, pushing up mortgage repayments, discouraging spending and at the same time helping banks secure deposits, all reducing the supply of money in people’s pockets. It can seem very nearly as painful as inflation itself.

But make no mistake – 10% inflation could be a threat to your wealth.  £100,000 in cash savings deposited last year would have a buying power of just £90,000 today. This is bad enough if you have cash in a savings account, but the problem is even worse when you look at your pension. You need to up the value of your savings pot by 10% each year to preserve its value, and the kind of lifestyle you want in your retirement.

Sharp practice from banks?

The erosion of your savings is being made worse by banks’ failure to pass on interest rate rises. 

Despite increases in the Bank Rate from 0.1% to 4.25% since December 2021, the average easy access savings rate is paying less than 2% in interest. Cash ISAs might offer a little more – although they will tie up your money for the privilege, and still offer nothing like the rate of inflation.

You may be able to mitigate the scale of the damage to your wealth by switching to a better savings rate. A call to us at Continuum can help you find the best rate for your cash.

But the answer may be to consider investing some of your capital. 

Becoming an investor

With inflation in double figures, currently no deposit based savings accounts appear to offer anything like the returns you need to beat inflation – and the Bank of England possibly cannot contemplate increasing bank rate to a level where it will. 

The solution could be to become an investor. 

Continuum are not suggesting by investing you will beat the rate of inflation immediately, investing money and returns have to be considered over the medium to longer term.

It can seem like a big step, but it is actually very easy to become an investor. Your money does not remain as cash, and instead is used to buy assets which are intended to provide an opportunity for capital growth or produce an income.

It may be possible to keep up with inflation, or even beat it by becoming an investor, and of course making the right investment decisions. Frequently, market commentators will point to statistical data showing that over certain time periods investment have returned better returns against deposit based accounts. However past performance should not be used as an indicator for future performance.

Of course, there is a downside. Savings are secure, and you know exactly what you will get back. Investments come with no guarantees. They can fall as well as rise in value, so you could get back less than you invest. 

You don’t even need to understand stocks and shares, or the stock market – there are funds which are managed by experts who can take care of investing on your behalf.  Some even let you invest with monthly instalments, which make investing as easy as saving – and potentially far more rewarding.

Get some help

To make investing rewarding enough to counter inflation needs some expert help. At Continuum we can work with you to help you prepare an investment strategy.  It may mean beating inflation, increasing your financial security and improving your financial outlook – and you can start by calling us today.

The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to a suitable investment strategy, you should seek independent financial advice before embarking on any course of action.

The value of investments can fall as well as rise and you may get back less than you invested.

A pension is a long term investment, the fund value can go down as well as up and this can impact the level of pension benefits available.

The Financial Conduct Authority does not regulate deposit accounts.

Inflation and price indices – Office for National Statistics (

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