How to boost income in an inflationary world

Indeed, in such a volatile economic climate, some savers may be better suited to a more conservative savings strategy, given that they offer the potential for reliable (if modest) returns.

Advisers should therefore make their clients aware of accounts still offering relatively generous returns. At the moment, some banks are still offering up to 0.6 per cent interest for savers looking to invest their cash instant access savings accounts.

Meanwhile, some fixed access accounts are offering up to 1.25 per cent, making this a viable option to boost their savings. 

So, if a client decides that traditional savings methods are preferable, advisers and wealth managers should ensure that their clients understand the various savings accounts available to them before making a decision. 

That said, for clients with a stronger appetite for risk, another potential route would be to invest in shares, or stocks and shares Isas, as these options can be good alternatives in order to hedge against inflation.

As companies will have the potential to grow their profits broadly in line with inflation, individuals will therefore have the potential to make stronger returns on their investment. 

Many advisers have provided genuinely invaluable advice over the past 12 months.

However, even if a client has the capacity to invest their funds this way, advisers should ensure that clients are well aware that share prices can be volatile.

Indeed, some assets can be adversely affected by higher inflation - for example, retailers who find that their margins come under pressure when the prices of wholesale goods rise. 

Whatever the case, this can be a risky investment tactic for clients – particularly if they have longer-term savings goals in mind.

After all, the approach of investing in riskier assets to compensate for lower interest rates will not always pay off, and individuals might find themselves worse off should an investment perform poorly.

The reintroduction of lockdown measures, for example, could mean that clients see their riskier investments go awry, so this should be a point of consideration if individuals need to invest with the promise of sure-fire returns. 

Looking to the future

Advisers will know all too well that there are never any guarantees as far as interest rates and inflation outlooks are concerned. However, after long speculation that interest rates would turn negative, this no longer seems to be the case.

Indeed, a recent Reuters poll in January found that the majority of economists expected the central Bank to keep rates steady at its record-low 0.1 per cent until at least 2024.

Consequently, investors and clients alike might plan ahead with the prospect that interest rates could remain low for quite some time.