‘Beat inflation!’ Tips for pensioners to make their retirement income go further

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As inflation continues to soar, many pensioners have been left struggling to keep up with the cost of living. Tim Latham, chartered financial planner at Equilibrium Financial Planning, spoke exclusively to Express.co.uk to discuss the issues facing Britain’s pensioners and how they may be able to turn the odds in their favour.

Mr Latham explained how pensioners can be susceptible to feeling the squeeze of inflation.

He said: “Pensioners who will experience higher impact due to rising inflation rates are those who are used to holding high levels of cash or have defined contribution pension arrangements, where pension income is based on the amount saved and investment performance throughout working life.

“Assuming a ‘generous’ interest rate from the bank of one percent and inflation at 5.4 percent, the monetary value of cash in the bank may have increased, but its purchasing power has actually reduced by 4.4 percent over the year.

“£100 in an account would now be £101, but what previously cost £100 now costs £105.40.”

Inflation currently sits at 5.5 percent, which is a 30-year high.

Meanwhile, the state pension will increase by just 3.1 percent from April 2022.

Mr Latham urged pensioners to put their savings to work in an attempt to beat inflation.

He said: “The most crucial way to mitigate the impact of inflation is by investing in assets.

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“Like how people shop around to find the banks with the best interest rates, investments target a better return that keeps pace with or even beats inflation over time.

“This ensures pensioners’ hard-earned savings are working as hard as possible for them.”

He also offered some tips on how pensioners can get started in investing.

Mr Latham continued: “The starting point is to consider upcoming expenditure and to establish a minimum cash reserve to keep in case of emergency.

“Any surplus cash could then be identified as a sum to invest.

“Investing gives pensioners the potential to generate a greater return that can therefore boost retirement income.

“The challenge in a high inflation environment is having to achieve a higher return and targeting this greater investment return demands taking greater investment risks.”

There are a variety of options for how to invest and Mr Latham outlined some of the more popular avenues.

He said: “The main asset classes are cash, bonds or gilts such as corporate bonds, property and equities (stocks and shares).

“Historically, the best performing asset class is equities, but this is also the most volatile in the short term.

“So while it may be favourable to beat inflation for longer periods, this may not fit one’s attitude to risk or shorter-term financial needs.

“The best asset class will be unique to a person’s circumstances, and it is therefore advisable that anyone looking to boost their retirement income through investments speaks to a qualified adviser to assess their best options.”

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