London 24 June 2008 - As the Bank of England warns that inflation will exceed 4%*, the retirement plans of many savers are at risk because their regular contributions are fixed at a flat rate.
Fidelity International, which offers the UK’s best value
SIPP, is urging pension savers to increase their regular contributions by at least the rate of inflation each year so that their retirement savings keep pace with prices.
At 4%, inflation can have a highly corrosive effect on savings. The real value of £1,000 - its spending power – more than halves to £456 in just 20 years at this level of price rises. RPI, the former measure of inflation, is currently 4.3%**.
David Dalton-Brown, Head of Fidelity International’s Direct Business, says: “Savers have not really had to worry too much about inflation over the past decade. The Bank of England has been very successful at keeping the consumer price index (CPI) close to its target of 2%. However, rising fuel and food prices are pushing up inflation around the world.
“With CPI in the UK forecast to top 4%, there is a real danger that many savers’ retirement plans will go off track because they fail to increase their regular contributions. Some savers’ contributions are set as a percentage of their salary, but many more opt for a flat-rate at the outset and never adjust the amount to take account of a rise in either prices or earnings.”
The
Fidelity Personal Pension, a low-cost SIPP for use with mutual funds, has a facility that enables savers to opt for an automatic increase in their contributions. This increase can be pegged to the annual rise in National Average Earnings or to a percentage between 1% and 10%.
The Fidelity MyPlan online tool enables anyone to assess whether they are on track to retire in style – or what they need to do to achieve this status. Go to
www.fidelity.co.uk/rewritingretirement/myplan.
FIL Limited (“FIL”) and its subsidiary companies serve the major markets of the world by providing investment products and services to individuals and institutional investors outside the US. FIL Limited manages a total of £130.4 billion of assets***.
Notes to editors:
* Source: www.bankofengland.co.uk/monetarypolicy/pdf/cpiletter080616.pdf, 16.06.08
** Source: Fidelity International, 23.6.08
*** Source: Fidelity as at 31.03.08
Any opinions expressed are made at the time of writing and can be subject to change without notification. The value of investments can go down as well as up and an investor may not get back the original amount invested. Past performance is not a reliable indicator of future results. The FundsNetwork SIPP is provided and administered by Standard Life Assurance Limited. Standard Life Assurance Limited is registered in Scotland (SC286833) Standard Life House, 30 Lothian Road, Edinburgh, EH1 2DH. Standard Life Assurance Limited is authorised and regulated by the Financial Services Authority.
