Rising interest rates may be welcome news to savers but following the Bank of England vote, Aegon warned cash savers are set to face the worst post inflation loss in 45 years.
This is because the Bank of England forecasted inflation will increase further to six percent by April 2022.
Steven Cameron, Pensions Director at Aegon, commented: “[The] decision to increase the bank base rate from 0.1 percent to 0.25 percent as a result of rocketing inflation will provide a glimmer of hope to those with significant cash savings.
“However, they shouldn’t be lulled into a false sense of security as inflation, currently sitting at 5.1 percent, is forecast to rise further, peaking at 6 percent in April. If the Bank of England’s prediction is correct, this will see an inflation rate 5.75 percent higher than interest rates, which means by Spring, those in cash could be losing 5.75 percent of their purchasing power over a year.
“Such a high loss for cash savers in ‘real’ terms has not been seen since the late 1970s, or for around 45 years.”