The latest inflation figures revealed that prices are rising faster than anyone had expected. The 1.2% rise in November was the highest since October 2014, and has led to speculation that it will rise even further in 2017 - as the impact of the weak pound filters though into shop prices. This is particularly bad news for pensioners.
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Pensioners tend to be hit harder by inflation than the majority of the population, because they spend a larger proportion of their income on the kinds of necessities that will be rising in price - including food and petrol.
As prices rise, this will put the squeeze on anyone on a fixed income, including everyone who bought a fixed annuity with their pension pot. Kate Smith, Head of Pensions at Aegon, adds: "Increasingly people are living 20 or more years in retirement and even low-level inflation can erode the value of retirement income over time."
Retirees with significant savings outside their pension, meanwhile, have an incredibly difficult job in helping this cash hold its value. Richard Wazacz from the peer-to-peer lending platform, Octopus Choice, points out: "Conditions have been terrible for some time, but this bigger than expected rise in inflation could mark the beginning of an even more painful period for the UK's savers. With interest rates almost certain to stay at their current level given the uncertain economic and political climate both at home and overseas, rising inflation will make it harder than ever for savers to keep their money real. If the Bank of England's latest inflation and interest rate forecasts prove accurate, money deposited in the average high street savings account today will be worth less in real money after both one and two years."
The squeeze on savings may persuade people to move their money into an alternative vehicle. However, as Wazacz points out this comes with risks of its own. He explains: "Anyone considering different options to cash in an effort to keep their money real should seek independent financial advice and pay close attention to the risks that come with rising up the risk spectrum."