UK inflation (CPI) hit a 30-year high as it grew by 6.2 per cent in the year to February 2022, according to the latest figures.
The increase means that UK households will need to find an extra £48.2bn per year to maintain their standard of living compared to a year ago, with each household needing to spend an extra £1,733 per year to maintain their standard of living.
According to a Royal London research on the cost of living, 95 per cent of UK adults are concerned about growing living costs, with energy bills, food shopping, and phone and internet contracts being the top concerns. Savings are also expected to suffer, with 48 per cent of full-time workers stating that they will cut back or cease saving completely. 21 per cent of respondents intend to borrow their way out of debt, with 7 per cent admitting they don’t know how they’ll pay for increases and 5 per cent indicating they’re considering a payday loan.
Royal London director of policy and external affairs Jamie Jenkins says: “Energy costs are pushing inflation to its highest level in 30 years, and energy bills are the expense of most concern to households. Pay growth is relatively strong at a little under 4 per cent, but this is outpaced by the combination of inflation and increased National Insurance Contributions due to take effect from April.
“Following two years of extraordinary measures from the Government to deal with the pandemic, we find ourselves lurching towards a cost of living crisis. All eyes will be on the Chancellor this afternoon as he weighs up his options to help.”
Canada Life technical director Andrew Tully says: “With inflation already at a record 30-year high, and tipped to reach 8 per cent by the mid-year, the worst is yet to come. But focussing on the peak, when it comes, is only part of the story. It’s the duration of high inflation that will continue to deliver bad news. How long inflation remains well above the 2 per cent target will determine our real living standards for years to come. Especially for pensioners whose personal rate of inflation may be well above the headline rate.
“While the government has restated their commitment to the state pension triple lock, any rise reflecting the current high inflation will only take effect from April 2023, which offers little in the way of comfort for those pensioners struggling to make ends meet today.”
Abrdn client director Colin Dyer says: “The Bank of England is suggesting inflation increases could hit double-digit figures later this year, and despite raising interest rates last week, the global nature of the issues causing it means this response is likely to only have a marginal effect on households.”
Steven Cameron, Pensions Director at Aegon comments: “The Chancellor’s Spring Statement (later today) has turned into a cost of living ‘not so mini’ Budget, although the longer-term financial and economic costs of the pandemic as well as the war in Ukraine pose unprecedented challenges too. This leaves Rishi Sunak with a difficult balancing act when facing calls for temporary or targeted support for those in greatest need.
“With the cost-of-living squeeze on the rise, individuals will face a further hit to their take-home pay from the planned 1.25 per cent National Insurance increase in just a few weeks. And for state pensioners, the 3.1 per cent increase in April is exactly half current inflation, leaving them one step forward but two steps back, undoubtedly leaving many severely stretched.”