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Inflation expected to erode savings and earnings

Inflation expected to erode savings and earnings

Category: Savings

Updated: 20/05/2013
First Published: 17/05/2013

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Around 78% of people expect their savings pots to grow less than the rate of inflation, according to the latest MoneyMood Survey by Legal & General.

The same sentiment was shared by just 29% of savers questioned by the insurer this time last year.

A few days ahead of the UK's inflation figures being announced by the Treasury, the findings reveal a bleak outlook from both savers and employees struggling in the face of tax and inflation.

Despite the Consumer Prices Index (CPI) falling from 3% in April 2012 to 2.8% last month, 59% of people believe their salaries will fall behind inflation over the next year, compared to four in ten (38%) of respondents in May 2012.

Mark Gregory, chief executive of savings at Legal & General, said: "Many more households have come to realise that they have to deal with high inflation combined with low interest rates, largely as a result of the Bank of England policy on QE.

"While low interest rates are good for borrowers, when inflation remains high that does come at a price for savers. People will either have to save more or look to save in different ways, or both to combat inflation," he added.

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