Strict (5

Money Matters: Money Matters:

The Impact of Rising Inflation10 Years of Belper IFS: Our First Decade

Nobody likes paying more for things, but inflation may be a particular problem in 2022. Here’s what it could mean for your finances. 10 years ago, Belper Independent Financial Solutions was formed after its founder (me, Kevin Glover) was made redundant from The Derbyshire Building Society.

Why is it increasing?Since then, Belper has seen the loss of The Derbyshire, The Bank of England has forecast inflation could regularly Woolworths, Somerfield, Thomas Cook and Britannia hit 4% or higher in 2022. That’s partly because some of Building Society to name but a few long-standing the suspected causes of recent price rises may be here for institutions that are now confined to history. some time. This includes: higher oil and gas prices (driven Generations of people have been served or been by worldwide demand) that affect manufacturing; a customers of these organisations. You are probably shortage of staff in lorry driving and hospitality pushing up one. State Pension Age has changed several times and wages; and supply-chain problems such as global shipping will most likely do so again. At least interest rates have slowdowns and silicon chip shortages.not changed much! Rubbish then and not much better today. The fact that it’s manufacturing costs rather than consumer demand for specific products may affect the Consider this – joining the EU was considered the right way shoppers experience this inflation. It’s likely they’ll decision once upon a time. find everything seems a little pricier, rather than particular items suddenly feeling shockingly expensive. That could From my dining room in 2009, to an office in Heanor, mean the squeeze of incomes – especially with National back to Belper and now to the present location, much Insurance rising in April – is a little tighter.has changed including the greyness of my hair and the size of my waistline! Now as a team of 8 we have seen Not just spenders the client base expand over the years. ‘Generous ’ Savers and investors may also notice the difference. A 4% successive Chancellors introduce new legislation inflation rate exceeds all but the most attractive savings impacting the public and signposting the need for rates on offer, meaning savers lose buying power over financial advice. time. (Though savers are still better off than those not making any interest.) That could incentivise some people What about you – what has changed in your lives over with spare cash to move to riskier investments in the the last 10 years? How many jobs have you had? Has hope of a better return.your family extended or tragedy struck? How many times have you moved house? How many pension Effect on pensions schemes have you been a member of and simply left, Rising inflation has consequences for pensioners, through one reason or another? How many cars, beyond increasing prices. The ‘triple lock’ means the partners and other life events have occurred? state pension rises each year by whichever is higher: rises in average earnings, inflation from the Consumer Price How many investments have you made and when were they last reviewed and looked at? My point is that the need for financial advice and a solution should not be seen as a one-off. Financial products and solutions were probably right at the time, but just how much has changed since their inception?

Investment funds (whether held in pension wrappers or alternative structures such as Stocks and Shares ISAs), are mostly run by fund managers who are also human beings. As humans they may retire, defect to other companies, or run out of luck! Solutions that may have been right at the start may no longer be suitable or effective. Leading fund managers in 2009 may no longer be leading fund managers as we approach 2020.

In April 2015, pension regulations changed. They will almost certainly change again. Pensions from prior to this time may no longer be suitable – but just how would you know? So, as you sit munching your turkey over the festive period, consider how many of these questions apply to you and see what may benefit from having a review.

Is 2020 the time to take a look at your financial arrangements once again and get them fit for purpose?

Wishing you a happy 2020 and a prosperous next 10 years.

Index, or 2.5 percent. A prolonged spell of inflation above 2.5 percent could mean bigger pension rises.

Effect on mortgages

Perhaps the biggest concern for many consumers is how inflation could affect their mortgages. Until the financial crisis of 2008, central banks and governments traditionally used higher interest rates as a way to bring down excessive inflation. The theory was simple: higher interest payments meant homeowners had less money to spend in the shops, meaning retailers couldn’t get away with too many price rises. Since 2008, however, central banks have tended to concentrate on keeping rates as low as possible so that people have spare money to spend and help keep the economy moving. Another argument against rate rises is that the current inflation doesn’t appear to be the result of consumers having too much money, but rather goods being more expensive to produce. That means interest-rate rises might not have that much effect and could even cause problems with consumers cutting back on purchases of non-essential goods. On the other hand, the Bank of England’s Monetary Policy Committee (which sets interest rates in the UK) may conclude rate rises are its last resort against excessive inflation. That means existing borrowers, those coming to the end of fixed term deals, and those planning to take out a mortgage for the first time, should all build some extra slack into their calculations and make sure they could cope with any increase in their monthly repayments.

By Kevin Glover, Belper IFS

This information is general only and is not intended to address your particular requirements. The data above should not be relied upon in its entirety and shall not be deemed to be or constitute advice. No individual or company should act upon such information without receiving appropriate professional advice after a thorough examination of their particular situation.

10 Chapel Street Belper DE56 1AR