Inflation figures may affect savings – expert warns of ‘false signal for savers’


Savings and other financial assets are in a precarious position at the moment as the economy struggles to adapt to a new normal. Last week, the ONS revealed that the UK’s inflation rate dropped from 1.5 percent in March, to 0.8 percent in April.

The fall was reportedly due to falling energy and oil prices.

Inflation figures can have a corresponding effect on certain financial assets which includes regular savings accounts.

Interestingly, the latest inflation figures may give some savers a false sense of security as their bank accounts will now be beating inflation, often for the first time in years.

However, this isn’t really an achievement as bank rates are still very low by historical standards and are unlikely to stand the test of time.

READ MORE: Savers struggle as accounts are reduced to cope with lockdown

“Many high street banks, building societies and challenger banks are cutting rates but there can still be ways to generate above-inflation returns by exploring alternatives such as regular savings accounts, longer fixed-rate ISAs and stocks and shares.”

Kevin comments on how, eventually, the economy will bounce back.

This is something many hope for but as it stands, people’s employment and income levels are under strain.

Some people may have been forced to dip into their savings just to get through this period, which will be a very disheartening thing to go through.

However, this need not be the only choice people take.

Some people may have a portfolio of savings assets, including a “rainy-day” fund.

Neil Lovatt, a Commercial Director at Scottish Friendly, revealed that now could be the time for families to utilise what they have: “The sensible thing to do if you’ve seen a drop in your earnings and have less disposable income is to pause your regular savings or investments.

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“If you have a rainy-day fund set aside then now could be the time to draw on that pot of money because frankly if this isn’t a downpour then what is?”

Some people will be fortunate enough to fall back on spare cash but there may be families in the UK who don’t have much in the way of savings.

In these circumstances, people may have no choice but to turn to the state for support.

Thankfully, the eligibility rules for Universal Credit have been relaxed in recent months to accommodate the influx of struggling consumers.

Universal Credit can now be applied for entirely online and the government has removed some previously restrictive rules such as the minimum income floor.

Claimants may qualify for Universal Credit if they are:

  • On a low income or out of work
  • 18 or over
  • Under state pension age
  • Have less than £16,000 in savings (between the claimant and their partner)
  • Living in the UK



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