Three ways to safeguard your retirement savings against inflation

investment tips

Many people reach retirement, after years of diligent planning, only to discover that their savings don’t have as much buying power as they’d hoped for due to inflation.

And with some economists predicting inflation won’t return to normal levels until 2024, it’s prudent to begin considering ways that you hedge against the current cost of living.

With that in mind, we’ve written this short guide to explain three ways you can safeguard your retirement savings against inflation – but first, a quick overview of UK inflation.

What’s the current state of UK inflation?

Inflation is the weakening of a given currency’s value. Economists can quantitively estimate this by measuring the increase of prices over time using indices.

As of September 2022, the Consumer Prices Index has risen by 8.8% year-on-year, reaching the highest level in 40 years.

What this means in real terms is that the national unit of currency – the pound – buys a lesser amount of a given good than it used to. But for you and me, inflation manifests itself in the form of rising prices, tighter budgets and greater financial pressure.

3 ways to protect your retirement pot from inflation

Regardless of which stage you’re at in your retirement journey., inflation can feel like it’s putting the future you’ve worked so hard towards at risk. Research from Equity Release experts, Key, showed that currently only 2 in 5 (37%) of us have prepared for inflation in retirement. That’s why it’s so important you take action to protect your retirement pot from the depreciating affect inflation has on your money.

So, what are some ways you can future-proof your finances against inflation?

Unlock cash trapped in your home

Equity release is a little-known option that can help you ease the pressure of rising inflation. It’s a great option if you need to unlock some cash to supplement your retirement income.

If you’re wondering how equity release works, here’s a brief explanation:

You take out a loan against part of the value of your home. By doing so, you unlock some of the money you’ve paid into your mortgage over the years. You get to stay in your home, without needing to make any monthly payments. The loan provider gets their money back from your estate after you’ve passed away.

Invest in gold

Historically, gold has made a good hedge against inflation. That’s what makes it a great investment option for people in or near retirement. It maintains its value over time extremely well as its value isn’t correlated with other assets such as stocks, bonds, or property. However, this is a double-edged sword – its value typically won’t increase, even when the market is soaring.

Lifetime ISA

Many middle-aged people mistakenly believe that their money is safe in a bank account. But unless a sum of money is growing at a rate that matches inflation, it’s actually losing its value.

Yet if you’re still under 40, you can use a Lifetime ISA to beat inflation. You can invest up to £4,000 a year and the government will add a 25% bonus to your savings – giving you a rate of return that’s hard to beat anywhere else.

With inflation so high, it’s important you do everything you can to protect your retirement savings. Follow our tips above to ensure you have as much spending power as possible when it’s time to retire.


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