People will inevitably pay less into insurance and pensions as the country goes through a “very dodgy” period in which inflation continues to soar, according to Highclere Financial Services and CI Expert director Alan Lakey.
Office for National Statistics data today revealed the Consumer Prices Index (CPI) measure of inflation hit its highest level in 40 years last month, hitting 10.1% in the 12 months to July 2022, up from 9.4% in June.
Speaking to Health & Protection, Lakey (pictured) explained the increase is having a number of impacts, particularly on how people were able to protect themselves financially and save for the future.
“In every walk of life people are going to be spending less money whether it’s a mortgage or whether it’s insurance or it’s a pension,” Lakey said.
“I was talking to somebody yesterday who said many people have already reduced or stopped paying into their pension in anticipation of hikes in food, fuel prices – you name it.
“We’re going through a very dodgy period,” he added.
Lakey noted that the Bank of England has suggested inflation will be back down more normal levels in two years’ time.
“Interestingly that’s borne out to some extent by market sentiment,” Lakey continued.
“Because last week for the first time ever that I can remember, five-year fixed rate mortgages are cheaper than two-year fixes, which I’ve never come across before.
“Normally you pay a premium for the extra time but in this instance the swap markets are taking the view that two years will be a bit iffy but in five years we’re going to be okay.”