Is the importance of the effect of inflation realised in retirement planning?

The last inflation figures brought some relief to British consumers amid the misery, but this has not been a great few years in terms of the real erosion in the value of their assets. We know that figures get bandied about for how much people will need to retire on comfortably. But do they realise the importance of inflation to their retirement planning and retirement goals?

It strikes me as vital that people are aware of what inflation can do to their savings and investments – thinking about the impact inflation can have in terms of the sort of sums they may wish to have saved for when they retire, but also what it means for the cost of things when they retire.

Simply calculators are one way to help, especially if part of a logical online journey, but perhaps pension firms need to factor it into all their messaging.

It is not all bad news of course. If you have paid off your home, as many people in their 50s and 60s and beyond have, it means your money stretches a lot further. But there is also bad news such as what seems to be the ever increasing cost of buying an annuity income. Given that we all have our own personal inflation – and it can be rather high for pensioners – some idea of the cost of spending is needed too.

There is also a high risk that with auto-enrolment and NEST some people will put their pension planning in the ‘sorted’ pile. Those who can afford decent individual financial planning may be well aware of the sort of sums they will need to have gathered – as part of their lifetime cash flow planning. But a lot of others may need alerted to the fact, that the auto-enrolled minimum may meet only their very basic needs.

Without frightening people or simply turning them off the subject, we may need a debate about how we get the long term inflation message across.

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