In a survey of UK adults by financial mutual Scottish Friendly just over eight out of 10 were concerned about the cost of living and were taking steps to try to reduce their outgoings. Worryingly a third were concerned that inflation would leave them struggling to pay for essentials such as mortgage, utility bills and food. A major issue for many at the moment is energy bills which are expected to soar dramatically in April when the price cap is increased. The cap is currently set by regulator Ofgem at £1,277 for those on a default standard variable tariff.
April’s new figure is not yet known but Money Saving Expert founder Martin Lewis has warned it could go as high as £1,827 based on some predictions.
The fuel poverty group National Energy Action have suggested an average forecast of an extra £467.
According to Scottish Friendly’s survey two thirds of households are worried about how they will cope if hit with a higher than expected bill.
Savings Specialist at Scottish Friendly, Kevin Brown said: “With the cost of petrol, energy bills and mortgage costs soaring, many are finding the squeeze on their household finances difficult to manage.
“With sharp price rises, Christmas just around the corner and expected increases in national insurance in 2022, it’s a challenging time for a large majority of Brits.
“For those that are feeling the pinch, having a really good handle on all your outgoings to prioritise the essentials and potentially cut back on other areas can help.”
Eating out has been a big area people have cut back on with 46 percent reporting less trips to cafes and restaurants.
There are also signs of people looking to find cheaper ways of getting their essentials with 43 percent shopping in cheaper stores and 38 percent buying own brand products.
Worryingly 32 percent also said they were keeping the heating turned off for longer to keep bills down.
Inflation is also hitting savings on two fronts.
With money tight to cover essentials 42 percent surveyed expected to have to dip into their savings over the 12 months to make ends meet.
Meanwhile the savings themselves are being eroded in real terms with inflation at 4.2 percent outstripping interest rates.
Nearly three quarters of respondents said they were worried their money was losing value with one in three considering investing it elsewhere in the hope of better returns.
Although some savers have been hoping for a rise in the Bank of England base rate in the coming months it is unlikely this would be passed on to savers sufficiently to make a difference.
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In research out today financial provider Aegon warns £10,000 in cash savings with a 0.5 percent interest rate but 4 percent inflation would lose the equivalent of £337 in purchasing power by the end of 2022.
Aegon Pensions Director Steve Cameron said: ““The lurking threat of inflation next year and beyond could far outweigh any small changes in interest rates for those with large amounts of money in cash savings.
“Following many years of low inflation, people may have forgotten how damaging high inflation can be.
“But in the coming months and years savers should think carefully about where they put any additional cash that is not needed in the short term.”
Inflation is currently expected to peak at around five percent next year and then begin to fall back down towards the Bank of England’s two percent target.
However the Bank’s Deputy Governor Ben Broadbent has recently warned it could comfortably exceed five percent in spring next year.