• After two years of 7% inflation, £10k in cash-based savings earning 1.5% interest could decrease in purchasing power to just £8,910
  • In comparison, if inflation was BoE’s target of 2%, £10k in savings would only slightly reduce in buying power to £9,894 after two years
  • Standard Life shares tips for savers to make the most of their money during periods of high inflation


The purchasing power of cash-based savings will be severely impacted if the current high levels of inflation are sustained, new analysis from Standard Life reveals as it examines the impact of prolonged periods of high inflation on people’s hard-earned money.

As UK inflation soared to 9.1% in May– with predictions it will hit 11% at its peak this year - consumers have had to contend with the rising household energy bills, escalated cost of food and transport as well as the decreasing purchasing power of their money, deepening the cost-of-living crisis for many.

New analysis from Standard Life, part of Phoenix Group, highlights the extent to which savings can be affected by inflation, and in particular the impact that a prolonged period of high inflation could have. For example, £10,000 in savings earning 1.5% in interest would drop in buying power to just £8,910 after a two-year period of 7% inflation.

In contrast, if inflation was 2%, the Bank of England’s target level, after two years its purchasing power would be £9,894. Savers are consequently at risk of seeing their money erode in value quickly if the current situation lasts.

  Annual Inflation
Year 2% 3% 4% 5% 6% 7% 8% 9% 10%
1 £9,947 £9,846 £9,744 £9,643 £9,541 £9,440 £9,338 £9,237 £9,135
2 £9,894 £9,693 £9,495 £9,398 £9,103 £8,910 £8,720 £8,531 £8,345
For a £10,000 savings pot, earning 1.5% interest

Jenny Holt, Managing Director for Customer Savings and Investments at Standard Life said: "Most people have been feeling the effects of rising prices over the last few months, as fuel, energy and food costs surge. Unfortunately, the Bank of England is predicting inflation rates will peak later in the year, potentially reaching 11%, and this not only affects your regular income, but hard-earned cash-based savings will be impacted too as its purchasing power is reduced. It’s therefore especially important to make sure that the money you have saved and can save is working as hard as it can for you and your future."

With predictions that high inflation is likely to continue throughout 2022, and potentially beyond, Standard Life offers tips to help you make your savings work harder.

  1. Revisit your financial goals - As you start to notice the effects of increased prices, you might find that your current financial goals could take longer to reach than originally planned, or they might need to be adjusted. So now could be a prime time to revisit your plans and consider if they need to change.
  2. Have a direct debit detox – Many of us rack up memberships and subscriptions that we could probably live without, so have a think whether you could cancel them or shop around for a better deal. You might be surprised at how much money you could save.
  3. Prioritise your spending – Whilst times are tough, it’s worth seeing if you can put off purchases you’d planned for a while longer. If it’s not essential, you might be better waiting until you’re confident that making that purchase now won’t impact your standard of living. However, if you’ve been thinking about making a big purchase, such as a car or a required home improvement and you have the money to do so, you might find you’d be better off going ahead now rather than waiting until later when prices could be even higher and the pound in your pocket worth less – it could save you money in the long run.
  4. Try to clear any outstanding debt - When inflation rises, interest rates are generally increased to help control the economy. If you have any variable rate debt, you might find that your regular payments go up as a result. So, it’s best to review debt arrangements as a priority, making sure you are reducing interest being paid as much as possible.
  5. Make the most of tax efficient savings - You might find there are different benefits you could get depending on how you save your money, which could make the most of what you’ve got. It’s worth bearing in mind that you get tax benefits on pension payments, effectively meaning it costs less to save more into a pension plan. So even if you’re focussed on short-term finances at the moment, it’s important to continue contributing to your pension: time in market is one of the most important factors in investing, and if you choose to stop contributing you may miss out on valuable contributions from your employer. Although remember that you can’t access your pension savings until you’re aged 55 (rising to 57 in 2028). If you want to access your money before 55, Stocks & Shares ISAs are a great, tax-efficient way to save for medium or long-term goals without having to tie up your money. Or you could consider a Cash ISA for shorter-term goals like rainy day funds- but, of course, be mindful of the impact of inflation on the value of these.
  6. Consider making investments - If you want to give your savings the opportunity to grow in line with the rate of inflation (and, importantly, stand a chance of beating it) then one of the best ways to do this is to invest over the medium to long term, which is generally five years or more. Your pension plan, Stocks & Shares Individual Savings Accounts (ISAs) and any other investments will offer investment options that have the potential to grow your money over the medium to long term. For more information on this, you can speak to your bank or provider, or visit the government’s free Money Helper service.




Sarah Muir
07870 397538
Darragh Leeson
Standard Life
07707 270001

Notes to editors
Further data based on different savings pot sizes, and different interest rates is available

About Standard Life 
Standard Life is a brand that has been trusted to look after peoples’ life savings for nearly 200 years.
Today it proudly serves millions of customers who come to Standard Life directly, through advisers and through their employers’ pension scheme.
Standard Life is part of Phoenix Group, the largest long-term savings and retirement business in the UK. We’re proud to be building on nearly 200 years of Standard Life heritage together.
Our products include a variety of Pensions, Bonds and Retirement options to suit people’s needs, helping our customers to invest and save for their future. We’re proud to offer a leading range of sustainable and responsible investment options.
We products include a variety of Pensions, Bonds and Retirement options to suit people’s needs, helping our customers to invest and save for their future. We’re proud to offer a leading range of sustainable and responsible investment options.
The value of investments can go down as well as up, and may be worth less than originally invested.


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