Inflation may have fallen to 2.6 per cent in June, but it is still above the government’s February target and eating into savings, experts have warned.
Today (18 July) the Office for National Statistics announced the Consumer Price Index measure of inflation has fallen for the first time this year, with the figure dipping by 0.3 percentage points to 2.6 per cent in June.
But an Aegon poll of 617 advised customers at the end of May revealed these price rises are already starting to influence the way people manage their finances.
Four in five people polled by the provider revealed they are now concerned they will no longer be able to maintain their current lifestyle, with 28 per cent even redirecting money away from their regular savings to meet the increased cost of living.
Two thirds (62 per cent) of those aged 18 to 30 report that rising prices have left them with less money at the end of the month than they had six months ago, and they are also far more likely to be diverting money away from savings.
More than half (52 per cent) of those aged 18 to 30 have had to reduce their monthly savings to help with the increased cost of day-to-day living.
Kate Smith, head of pensions at Aegon, said: “Rapidly rising prices are almost always bad news for consumers, particularly pensioners on a fixed income, who are clearly having to go through a bit of belt tightening at the moment.
"The problem is amplified by both low wages and low interest rates, which give people little opportunity to grow their savings to meet the growing cost burden.
"There are lots of options available for people that want to diversify their investments outside of rock bottom savings account, but it’s important to plan ahead, and if dealing with significant amounts, consider seeking the input from a financial adviser.
Sam Slater, head of communications at Chelsea Financial Services, said: “We don’t see inflation hitting 3 per cent, but with savings interest rates so low it is fair to say things don’t look too good for most people.
"Based on current information, we think inflation has peaked. And with oil prices, of instance, falling the forecast is a little brighter.”
dan.moore@ft.com
