Pensions - Articles - Soaring inflation may cause base rate to be lifted

 Steven Cameron, Pensions Director at Aegon comments on inflation spiking to 4.2%: “Following a dip in September, driven in part by the recovery of restaurant prices following the ‘eat out to help out scheme’, CPI continued its upward path soaring to 4.2% in the 12 months to October, driven by rising energy prices and supply chain issues.

 “With rising prices, consumers should consciously think about what products and services they are buying as the value of the money in their pocket becomes increasingly threatened. Any festive cheer of a boost to purchasing power looks unlikely in the lead up to the period where incomes are at their most stretched. Borrowers, and particularly those who may have emerged from the pandemic in debt, will feel the squeeze on their finances even more so, during what is already a challenging time of year for many households.

 “Those on fixed incomes, such as many pensioners relying on the state pension, will also face a real challenge in meeting higher costs in the coming months, particularly with the government scrapping the state pension triple lock next year. This will mean the state pension’s 3.1% increase in April will likely be far less than the rise in the cost of living at that time.

 “The Bank of England have so far held off raising interest rates to ease the cost of living squeeze, but as the full post-pandemic picture becomes increasingly clear, the base rate may soon be lifted from its historic low.”