Investments  

Inflation pinch for cash pension savers

Inflation pinch for cash pension savers
Photo: Suzy Hazlewood via Pexels

Inflation fears have not stopped millions of Britons squirrelling their retirement savings away in low-yielding cash investments, research has claimed.

According to analysis of 2,000 UK adults, carried out by Opinium Research on behalf of Barnett Waddingham, 45 per cent of people have been putting cash into basic savings accounts to prop up their pension.

Outside of any workplace pension scheme, 48 per cent of all respondents aged 55 and over were relying on savings accounts. The second most popular saving mechanism was current accounts - at 37 per cent of all savers.

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While 25 per cent of people were using Isas, this was also in cash - with only 17 per cent of all respondents stating they were using a stocks and shares Isa.

With inflation hitting 11.1 per cent CPI - a 41 per cent high, as reported previously, Mark Futcher, partner and head of defined contribution at Barnett Waddingham, said: "Squirrelling away money for retirement into a cash savings account might feel safe, but the reality of the inflationary environment is that it could be falling in ‘real terms’ by as much as 8 per cent or 9 per cent.

"That’s not a performance people would accept from any other asset class; risk changes over time, and equities are less ‘risky’ in the long term than the short term."

He urged people to speak with financial advisers to help put them on a better trajectory towards building a more secure retirement pot. 

Earlier this week, FTAdviser reported that savers were losing out on £26.7bn in interest payments when compared to the current rate of inflation.

According to data from Bowmore Asset Management, the current average interest rate for all open cash Isas sits at 1.74 per cent, meaning savers are earning only £5bn in interest.

But perhaps most worrying, 27 per cent of all savers in the Barnett Waddingham study said they were making no other additional provision for retirement (see table, below):

Excluding any pensions, do you use any of the following as a means of saving for retirement?

 

Gender

Age

Total

Men

Women

18 - 34

35 - 54

55+

Savings account

45%

48%

43%

45%

42%

48%

Current account

37%

39%

35%

43%

33%

35%

Cash ISA

25%

28%

23%

21%

23%

30%

Stocks & shares ISA

17%

22%

12%

20%

15%

16%

Premium Bonds

16%

18%

14%

11%

12%

22%

Cryptocurrency

5%

7%

3%

12%

4%

1%

I will use the house I live in to fund my retirement

4%

5%

4%

3%

6%

4%

Collectibles (e.g. art, wine, watches, cars)

4%

6%

3%

6%

3%

4%

Buy-to-let property

4%

4%

3%

4%

5%

3%

Other

2%

2%

2%

1%

2%

4%

N/A - I don’t use any of the above as a means for savings for retirement

27%

23%

30%

20%

30%

2

Source: Barnett Waddingham