In this article, we are sharing a video we published recently concerning the rise of inflation and the potential impact it may have on people in the UK. This short informative video is delivered by one of our independent financial advisers George Rashbrook and is part of our ongoing commitment to helping people improve their financial literacy and knowledge.

Concerned about the impact of inflation? Speak to one of our IFAs today

After watching this video, if you are concerned about the impact inflation may have on your financial plans, get in touch with one of our independent financial advisers today.

You can call us today on 01329 550 190 to see how our independent financial advisers can help.

Inflation in the news. What does it mean?

Inflation has been headline news this week.  The consumer price index has hit 5.1% and people are very concerned. 

What is inflation?

Inflation is the reduction of purchasing power of a currency over time. When inflation occurs, the cost of goods and services increases. The money in your bank is worth less than it was before. Every pound you have buys you less.

What does all this mean and should you care?

In simple terms, based on the current rate of inflation it means something that cost £100 year ago will cost £105.10p today.

An extra £5.10p may not sound a lot, but when you apply that to everything you spend – food, petrol, clothes, gas and electric, everything you can think of – it adds up to a big increase.

Related reading: What is inflation, what causes it, and how is it measured?

The long-term effect of inflation

More concerning than that is the long term effect of inflation.

For example, if inflation were to continue at the current rate for the next ten years, that thing that cost you £100 a year ago would cost you £173.83.

That is a massive increase.

The extra £5.10p becomes £73.83p.

Inflation impacts savers

This is particularly going to hit people with savings in the bank or building society.

If you think keeping your money on deposit is “safe” you might need to revisit this.


For example, if you have £10,000 in the bank and inflation continues at today’s rates, you have ten years to grow it to £17,400 just for it to be worth the same as it is now.

Simply put, in ten years you would need an extra £7,400 to purchase exactly the same items as you did today.

Please note, when we say “safe” we are referring to how safe your money is in terms of the impact inflation can have on its value. Money deposited in saving accounts, up to the value of £85,000  is covered by the FSCS.

Does raising interest rates help limit inflation?

The Bank of England has taken the steps to raise interest rates. 

That’s good for savers, right?

Well yes, but it’s nowhere near enough to eliminate inflationary risk.

The amount of interest you earn on your savings has to be at least equal to the rate of inflation for a savings account to be a viable long-term strategy.

If inflation is 5.1%, you need to earn 5.1% interest on your savings for your money to keep pace with the rate of inflation.

The base rate has increased from 0.1% to 0.25%.  For a basic-rate taxpayer to match inflation at today’s rates it would need to be closer to 6.8%.

It’s like you’re saying to the bank manager “look, I need 680 of something” and the bank manager saying, “The best I can offer is 25”.

Don’t get me wrong, a savings account is the right place for some of your money – an emergency fund, next year’s holiday, anything you know you’re going to spend in the short term.

But as a long-term strategy in an environment of high inflation, it’s a risky strategy that offers very little by way of reward.

Concerned by inflation?

If this is of concern you need to seek independent financial advice, put yourself in an informed position and plan ahead.

How can we help? Financial planning, pensions advice, wealth management and more

At Sterling & Law – Hampshire we offer a range of services for those looking for support with their personal finances.

Depending on where you are in your life, your financial circumstances, or the stage you are at in your investment journey we can help.

Our services relevant to this article are:

  • Financial planningSpecialist advice on how to achieve your long-term financial goals & aspirations. Skilled, experienced independent financial planners, focused on your objectives. Looking to formulate an effective financial plan? Find out more
  • Pensions advice & investment advisersPlanning for later life income and helping you realise long-term financial security. Specialist pensions and investment advisers help you save and invest toward your ideal retirement. Are you confident your current choice of pensions and investments is aligned to your retirement goals? Talk to one of our pensions and investment advisers today
  • Wealth management & planningSkilled, experienced wealth management professionals offering valuable advice. Helping you to achieve your long-term goals through our dedicated wealth management and planning service. Do you have a wealth plan in place? Have you invested wisely? We can help
  • Retirement planning specialistsExperienced, independent retirement planners helping you achieve your dream retirement. Need support evaluating, and forming a tailored retirement plan? Our retirement planning specialists can help
  • Estate and Inheritance Tax PlanningSkilled, knowledgeable estate planners and inheritance tax advisers. Protecting your financial legacy and ethically mitigating and reducing your IHT bill where possible. Do you want to potentially pay 20% – 40% tax on your estate? Seek advice today
  • Life cash flow modellingAdvanced, data-driven financial planning software. Modelling your financial future and planning for your long-term goals and objectives.

Financial articles and videos from the Sterling & Law – Hampshire team

If you enjoyed this video and article, you can access more by visiting our YouTube channel, or by following us on LinkedIn or Facebook.

You can find links to two related articles we have recently published below.

A guide to choosing a financial adviser

Video round-up: Financial habits, inflation, market volatility, pensions, & IHT

Please note: all information contained in this video was right, and correct at the time of publishing and has been sourced from reputable mainstream sources.