Inflation a bigger sting than income tax or VAT

17 November 2010

Savers are more likely to consult the pages of the financial press, rather than visit an adviser, and believe inflation has a bigger impact on their lives than income tax or VAT.
With an unexpected rise of inflation to 3.2% yesterday, results from a survey by specialist lenders Aldermore show how savers feel about it.

People are becoming wiser when it comes to saving and regular savers were not surprised by yesterday's increases.

Three quarters believe inflation will either rise or stay the same next year and despite the need to generate inflation beating returns, they remain risk averse and cautious about converting cash into equities.

Opinion over the Bank of England's role in economic improvement is mixed and the majority don't want to follow the bank's advice to "spend, spend, spend".

Simon Healy, head of savings at Aldermore, says: "Savers feel they've been abandoned as the spotlight remains firmly focused on the recovery. The Bank of England's primary purpose may be to keep inflation in check but savers believe it's more concerned about the prospects of a double-dip recession than inflation continuing to run out of control."

According to Alliance Trust Research Centre, which looks at how inflation affects different age groups, people aged 50-64 are facing the highest rates of inflation of 4.1%, because this group spends more of their disposable income on transport, where inflation remains at almost 6%.

The over 75s endure inflation at 3.6%, and are likely to be affected by rising gas and food prices.

The under 30s have the lowest rate of 3.5% for the second month in a row, helped by falling prices of audio-visual equipment.

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