Sticky inflation has again hit the headlines, causing concern for people's retirements as they are increasingly having to prioritise spending over saving for their later life.
The rate of inflation eased slightly in March but it remained in the double digits at 10.1 per cent, which has led to expectations of further interest rate rises from the Bank of England down the line.
A particular concern is sticky core inflation (excluding food, energy, alcohol, and tobacco), which remained at 6.2 per cent, unchanged from February.
Lily Megson, policy director at My Pension Expert, said the current economic situation meant for many the idea of a financially secure retirement hangs in the balance.
She said: “Following last month’s shock increase, Britons will welcome the return of slowing inflation. But we are far from the finish line; the threat to people’s finances prevails as inflation remains at eye-watering levels.
“For many, the concept of a financially secure retirement, after years of hard work and diligent saving hangs in the balance.
"Indeed, My Pension Expert’s latest research revealed that almost half (44 per cent) of over-55s currently in work feel the cost-of-living crisis has rendered retirement entirely impossible."
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: "The pound feels a lot smaller in our pockets right now as inflation continues to devour spending power, with wages rising so much more slowly.
Even when energy prices start to fall, prices of other categories such a food are likely to continue rising so the squeeze on household finances is far from over.Heidi Karjalainen, Institute for Fiscal Studies"This insidious drain on wealth, and the worry that it’s not temporary given that core inflation, stripping out volatile energy and food prices, remains so sticky means it’s more likely that another interest rate rise of 0.25 per cent is on the way from the Bank of England next month."
Research from iSipp found 2.9mn people saving into pensions are considering cutting contributions this year as the cost-of-living squeeze continues to put pressure on their budgets. It found 35 to 54-year-olds were most likely to reduce or stop pension contributions.
Pensions generally are not on the list of top priorities for people, which are made up of utilities, mortgages and TV streaming services. However, the Sipp provider also found pension contributions were among the last to be considered for cuts - people were more likely to have turned down heating or stopped buying clothes.
Managing director Hrishi Kulkarni said: “People should think carefully about stopping pension contributions as while it will save money for a month or two, the financial impact will be long-term and mean a lower income in retirement.
"The silver lining to the cloud over pensions is that they are among the last financial commitments considered for cutbacks as incomes are squeezed. It is less reassuring to find that pensions don’t make it higher up people’s list of priorities although entirely understandable what the top three are."
What's more, even if inflation starts to come down, which many predict it will in the second quarter of the year as energy prices start to fall in comparison with last year, the cost of living situation could persist for a while longer.
Heidi Karjalainen, a research economist at the Institute for Fiscal Studies, said: "Inflation in March remained high, but we expect to see a substantial fall in the rate of inflation next month as energy inflation will finally start to fall.
"This does not mean that the energy prices that consumers face are falling - just that they are rising less quickly. Households are only expected to start seeing lower gas and electricity prices from July this year.
"And even when energy prices start to fall, prices of other categories such a food are likely to continue rising so the squeeze on household finances is far from over."
Jonny Black, chief commercial and strategy officer at Abrdn, agreed: "Even if inflation is weakening, prices are still rising, just not as quickly.
"What the Bank of England is forecasting as 'significant' shifts in the CPI readings shouldn’t mean sizeable changes in clients’ strategies. The support of an adviser will be critical to keeping them firmly focused on their longer-term goals, and avoiding any steps that could prove damaging in the long-term."
carmen.reichman@ft.com
