As inflation soars - is now the time to review your investments?

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April 11, 2022

5 mins read

Inflation rates of 6% hit the headlines in February 2022, after months of steady rises were accelerated by the shock impact of the Russia-Ukraine war.

Whether you have pension investments or cash in the bank, we’re all going to feel the effect of rising prices over the next few months. The Bank of England is predicting inflation rates to peak later in the year.

But does rising inflation mean you should review your pension investments?

UK inflation is rising at its fastest rate for 30 years as fuel, energy and food costs surge.
Inflation is a measure of the rate at which prices rise. There are a few different measures, but the one the government uses in its targets is the Consumer Prices Index (CPI).

CPI tracks the price of a list of goods and services including food, clothing and household services. The government aims to keep this at 2%, but external events like the rising price of energy and fuel, pandemic, war in Ukraine and post-Brexit import changes have an impact on the price of goods and services in the UK.

How does inflation impact investments?

Inflation affects different types of investment in different ways.


  • High inflation can mean that your cash in the bank will lose value.
  • The Bank of England has announced a rise in interest rates in March 2022 from 0.5% to 0.75%, which will offset inflation to a small extent, but it isn’t enough to balance out inflation - which the Bank of England expects to hit 8% in spring 2022.
  • High inflation means that prices are rising fast. So if you’re holding £100 in the bank you’ll find that inflation means your money won’t go as far in the future.
  • So cash isn’t as ‘safe’ an investment as it was in times of low inflation. It basically means that if you have money saved in the bank then you’re losing purchasing power.


  • When inflation is high, bonds tend to fall in value.
  • Bonds are loans to a company or government. As an investor, you receive interest on that loan. The bond value fluctuates based on the attractiveness of the interest rate you are receiving. At the end of the loan period, you get back the value that you’ve invested.
  • When inflation rises, bonds become a less attractive investment. This can cause their value to drop. So if you’re invested in a fund that contains bonds, its value may drop as bonds become less desirable.

Stocks and shares:

  • Equities tend to be less affected by inflation.
  • Some companies can put their prices up to a certain extent in order to keep up with inflation, so in theory their profits can be maintained or could grow with inflation. You’re probably already seeing the impact of price increases in your day-to-day life. This is why shares in companies can be less affected by high inflation than other investment types.

During times of high inflation and low interest rates, we typically see equities as having an advantage over other types of investment - when held for the long term. Past performance is not a reliable indicator of future results.

Standard Life’s easy and low-involvement pension investment options are usually diversified. That means we spread out risk by investing in a wide variety of assets, industries and countries, so no single market event in one country should hit us too hard.

Think about the long term

 At Standard Life, our ultimate aim is to help you save for the life you want in retirement.

When you’re investing over the long term, we believe that the best approach is to invest in a diversified solution, and to take more risk early on when your savings have chance to recover from ups and downs.

That’s because we’ve seen that in the long term, markets tend to grow despite volatility along the way. And it’s that long-term growth that we’re aiming to tap into.

With pension investing, the best thing to do is to remain invested through the ups and downs of the market. Those who try to time when to come in and out of markets tend to do worse over the long term than those who remain invested throughout.

So if you’re invested in a Standard Life easy or low-involvement solution then you typically don’t need to do anything. We will manage your investment for you and we choose different types of investment depending upon how many years you have left until retirement.

Now is a good time to review your investments, but don't panic

Market changes are always a good prompt to check your investments. It can never hurt to learn more about where you’re invested, and at Standard Life it’s easy to find out more about your money using our online servicing tools.

Here’s my message for pension investors:

  • If you’re invested in a Standard Life easy or low-involvement option – for the majority of customers the best thing to do is keep your money where it is. Trust us to take care of this for you.
  • If you’re thinking of withdrawing into cash, be aware that you’re at risk of being affected by high inflation rates. Instead, staying invested through this period of market volatility could be the best option in the long term.
  • If you have chosen your own investments, then now is a good time to review them. Are you well-diversified and are your investments appropriate for your aims? You can find out what you’re invested in by using our app or online servicing tools and you can refer to our fund factsheets to check what individual funds are invested in.

If you’re not sure what to do then you may want to talk to a financial adviser. There’s likely to be a charge for this. If you don’t have an adviser you can find a list of advisers on - an independent site that can help you find the right adviser for you.

As a pension saver, you’re likely to be investing through a number of market ups and downs in the long term.

No one can predict what the next cause of market volatility may be. So let’s stick to what we do know – and that is that with a well-designed investment solution the best thing for most investors to do is to find the nerve to stay put and remain invested throughout.

Remember, you’re in this for the long haul.

The value of investments can go down as well as up and may be worth less than was paid in.

The information here is based on our understanding in April 2022 and shouldn’t be taken as financial advice.



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