EFFECT ON SPENDING AND
Rising inflation on top of “lost” wage growth leaves households facing the prospect of having to cut back on spending and potentially on their pension contributions.
In this section, we explore the impact on particular age groups, and we also investigate the pressure inflation puts on retirement savings.
Across age groups, people are generally very concerned about making ends meet as a result of the rising costs of living – overall, 81% are concerned, including 38% who are very concerned.
However, the middle aged (those aged 30-49 years) stand out with the highest share of those “very concerned” at over 45%.
This group is likely to have a different structure of household finances compared to the other groups as they are more likely to have children. Therefore the rising cost of necessities is likely to impact them the most.
EFFECT ON SPENDING AND SAVING
The large increase in household costs and the wider pressures since the financial crisis have already had a concerning impact, and this will likely persist in the future.
Some people may be tempted to sacrifice long-term financial stability to meet current challenges. Others with exposure to cash or low-risk assets in their retirement savings could see the real value of their pension pot eroded by high inflation, making it more important than ever to have a diversified pension investment portfolio.