Citywire for Financial Professionals
Share this page:
Stay connected:

Citywire printed articles sponsored by:

View the article online at

How to protect your retirement from inflation

Whether your're still saving or approaching retirement, you can still protect your income from the ravages of inflation.


by Michelle McGagh on Nov 16, 2012 at 12:57

How to protect your retirement from inflation

A hike in inflation not only means that day-to-day living is more expensive, it also has a detrimental affect on our retirement savings. Here’s how you can protect your money whether you’re still saving or coming into retirement.

Annual inflation, measure by the consumer price index (CPI), has risen again to 2.7%, meaning Britons have to find an extra £24.5 billion a year to maintain the standard of living they enjoyed 12 months ago, according to MGM Advantage.

For each household, working or retired, that’s another £932 a year to find to make sure the standard of living doesn’t slip.

It is hard enough for working families to find extra money when pay rises and jobs are in short supply, but it’s even more difficult to find extra cash when you’re retired.

Aston Goodey, distribution and marketing director at MGM Advantage, said: ‘The rise in inflation will continue to put financial pressure on households across the UK, and we have yet to see the impact of the recent increases in energy prices feed into the figures. Although the increase has been attributed to the impact of tuition fees, for those people in retirement living on fixed incomes the pressures on food and transport costs are being felt every day.

But don’t fret, there are steps you can take to minimise the impact of inflation, while you keep your fingers crossed that the Bank of England manages to bring inflation down to its target of 2%.

If you’re still saving for your pension

In short, the answer to beating inflation is, save more and invest in riskier assets that can offer a higher return.

James Norton, director of London-based Evolve Financial Planning, said savers had to be brave and take a level of risk with their pension investment if they want to save enough for a comfortable retirement – and the earlier you start saving the more risk you can take.

‘Young savers need to have risk in their portfolio – exposure to real investments and asset classes like equities [or shares]. Equities have not performed well over the last 10 or 15 years but if you want to beat inflation that is the where you have to be invested,’ he said.

‘For those who are a little risk averse you can still have an element of fixed interest but if you do not take any investment risk you are not going to make money on your pension.’

Norton said equities should make up the majority of pension investment until around 10 years before retirement, when the allocation of the pension should more to safer investments such as bonds and gilts, which produce a fixed interest.

Although he added that the 10-year shift would ‘depend on the circumstance of the person and how they will draw an income from the pension’.

Sign in / register to view full article on one page

5 comments so far. Why not have your say?

A Sick SIPP Owner

Nov 16, 2012 at 17:56


Take your SIPP pension fund (That you saved), and request that the Government regulated 'Trustees' put that investment into funds where the IFA and seller are regulated by the FSA, and the 'assets' are Government guaranteed and spread over a large numbr of insurance companies.

Now -

You'd expect the IFA advising you to have Professional Indemnity Insurance.

You'd expect the Trustees (A substantial money management company such as the Regulated Insurance company ) to check that the investment fund is appropriate for a SIPP, - Appropriately authorised, properly licenced, regulated etc - well they are Trustees - so you'd expect them

to have a duty of care in their 'management' of the money -

Isn't that why YOU are not allowed to 'manage' the money yourself?

You'd expect the UK seller of the investment, being FSA regulated to be OK

What a silly billy You are.

The FSA keeps knowledge that the IFA has no PII secret from the public

The FSA keeps knowledge that it fined the IFA for not providing appropriate advice secret from the public.

The FSA keeps knowledge that the Seller is misrepresenting the investment secret from the public.

Well - making their knowledge public may have caused a run on the fund,

Hey - it may even have stopped other IFA's reccomending the investment to their clients.

You would expect the stock market allowing the investment to trade to have checked the investment was properly managed and authorised.

So - the Regulator of the actual 'investment' gets to know that the managers of the fund haven't got the authorisation to sell the investment the way they are doing!

So - what to do - yes - ask them to stop selling the investment

Later - when the regulator of the UK seller gets advised? that that 'seller' is still taking money for the investment - tell the fund Regulator.

And - freeze the funds from investors in bank accounts paying 0.1% interest.

Ask the seller to contact the investors and ask if they want their money back.

Would you ask for your money back if you get a letter from the seller saying that you could have got your money back iunder the original terms, and you can now have the money back any time until after the investment is moved to the Irish marker , and you are getting the promised 'interest' payments.

Then again did you get a letter - did the regulator actually check that their 'request' had been complied with?


Still - all kept from the public so far - wouldn't want to alarm anyone.

So - the regulator of the investment stops payments from the investment fund back to the investors -

Still don't want to alarm anyone - so lets keep that secret too.

----- - - -

Eventually, investors get a bank statement that shows they didn't get the payments they were assured they would get -

Ooops - now the cat's out of the bag

When asked about the problem, now the regulators admit what they have done!

When pressured about their lack of publically visible action as the 'responsible' regulator -

Declare the entire investment type to be TOXIC, stopping anyone except the rich and 'financially experienced' from investing in similar products.

(Then there is the planned holiday, pay rise, performance bonus, resignation, with and leaving bonus - plus high publicity profile for the next job applications)

So - that's NO IFA going to reccomend that sort of fund -

Oh - and no worry about dealing with the reccommendin IFA - so they stop trading, or the seller - well maybe pass the file to the Fraud inspectors - That means you can 'legally' duck any questions regarding them ..

So the IFA is bust, and there is no insurance to cover their actions.

Well nevermind the next FSCS levy on still trading IFA's will cover any claims from the investors.

And besides they cannot claim for 'losses' until the fund actually goes under, or repays some of their investment and ceases trading.

Might be - oooh another 50 years before the last of their investment money can be declared 'gone'


Definitely do not invest in government guaranteed insurance policies from a wide variety of international insurers like I did - the Regulators will get you for doing that!

Maybe you should put it into a UK Insurer who will guarantee you a minimum increase in the fund!

report this

Michael Stevens

Nov 16, 2012 at 21:42

With Profits pension from the Prudential. It has worked very well in the last three years, since i purchased it.

report this

A Sick SIPP Owner

Nov 16, 2012 at 21:53

I got sold one of them via the bank to pay off the mortgage.

The bank ended up paying me the difference between the promised minimum and the actual maturity value.

I now have one of those frowned upon interest only mortgages for the residual debt. - well I did half-believe the and probably up-to amount quoted.

There are- many others who believed in other organisations quoted minimum returns - and they are still waiting for the government to pay-out their 'losses'

report this

Dividend Income

Nov 20, 2012 at 10:22

"...How to protect your retirement from inflation...."


On your way to retirement park each year the maximum amount in a low cost shares and stock ISA and invest in (then) historically undervalued dividend paying shares generating increasing (i.e. above inflation rate) dividends; re-invest those dividends in the same or similar (than) historically undervalued dividend paying shares generating increasing, etc . . . . repeat as long as possible and start drawing a completely tax- free income from your ISA when in retirement

report this

nigel morris

Dec 29, 2012 at 14:06

Get an ISA & invest in major companies like Bats SSE,Pennon & have all your dividends re -invested in more shares& have a increasing income in your retirement. It works

report this

leave a comment

Please sign in here or register here to comment. It is free to register and only takes a minute or two.

Sponsored By:

Weekly email from The Lolly

Get simple, easy ways to make more from your money. Just enter your email address below

An error occured while subscribing your email. Please try again later.

Thank you for registering for your weekly newsletter from The Lolly.

Keep an eye out for us in your inbox, and please add to your safe senders list so we don't get junked.

Latest from Investment Basics

See all headlines

Sorry, this link is not
quite ready yet