How to protect your savings from inflation

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With prices rising at a record pace, discover five ways to help protect your savings from the eroding impact of inflation


7 July 2022 | 3 minute read

The surge in inflation in recent months means it’s more important than ever to ensure your savings aren’t being eroded by rising prices.

Here, we consider some of the steps to help protect your savings from inflation.


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Shop around for the best interest rate

It is generally considered wise to have at least six months’ worth of essential expenditure saved as an emergency fund. This should be kept in an easy-access savings account so that you can instantly withdraw it if needed. Interest rates on savings accounts vary, so make sure you shop around for the best rate. On large amounts of money, a difference of only 0.5% can have a big impact on how much interest you earn.

Shift longer-term savings into equities

For savings over and above your emergency fund and short-term needs, consider whether you could move a portion of this into investments with better potential for long-term growth. Historically, by far the most effective investments at beating inflation over the long term have been equities – but you need to be comfortable that your investments will rise and fall in value.

Choose your investments wisely

There are other investments that offer the potential to mitigate the risk of inflation, provided you know where to look. You could, for example, consider certain types of bond funds, which invest in debt issued by governments and/or companies seeking to raise cash. Bonds pay a fixed rate of interest, known as the coupon, during their life and should return the original capital on maturity. Bond funds invest in many different debt securities to spread risk.

A financial adviser can devise a portfolio that suits your individual needs and seeks to provide real returns over the long term.

Maximise tax efficiency

Once you have considered where to invest your money, consider your investments’ tax efficiency. Both ISAs and pensions are tax-efficient vehicles which can help to boost the future value of your savings.

ISAs enable you to save up to £20,000 each year, with investment growth and dividends free from tax, and any withdrawals also tax free. Meanwhile, pension contributions are eligible for income tax relief at up to 45%, depending on your income tax band.

It is wise to take advantage of generous tax breaks over the years when you can afford to do so, and while they are available. This way, you also benefit from the powerful impact of compound investment growth – earning returns on your returns as well as your initial capital – to help outpace inflation over the long term.

Seek expert advice

A sensible investment strategy should involve holding a wide variety of assets, and using tax-efficient investment vehicles. Understanding what is right for you isn’t always easy – and that’s where getting some smart advice can help.  

We can structure a diversified portfolio that is tailored to meet your long-term financial goals and helps protect against the impact of inflation. To find out more, get in touch today.


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The value of investments, and any income from them, can fall and you may get back less than you invested. Tax treatment depends on the individual circumstances of each client and may be subject to change in the future. Neither simulated nor actual past performance are reliable indicators of future performance. Investment values may increase or decrease as a result of currency fluctuations. Information is provided only as an example and is not a recommendation to pursue a particular strategy. 

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