Pandemic savings are at risk of being wiped out entirely due by soaring inflation and the worsening cost of living crisis a fund manager has claimed.
Inflation burned through a record £98bn of savers’ deposits last year, with that set to rise significantly in 2022, Janus Henderson’s (JH) ‘Cost of Cash’ research showed.
“Inflation burned through almost all the cash savers added to deposit accounts last year, and 2022 is going to hurt even more as prices spiral higher,” James de Sausmarez, director and head of investment trusts at Janus Henderson, said.
Interest income has fallen from roughly £1,100 per year per person at the start of the millennium to a mere £69 last year, Janus reported.
People have wrongly been pouring funds into savings accounts rather than asset classes and investment trusts, Janus said, with a 17.8% hike since the pandemic began.
In money terms, UK savers have poured £283bn into accounts at banks, building societies and NS&I, since the start or £10,012 per household.
Cash deposits are now worth 18 months of all the UK’s consumer spending, but interest income fell to a record low on all this cash of £2.5bn.
De Sausmarez commented: “British people are quite simply neglecting their futures by leaving such vast amounts languishing in cash.
To illustrate how time erodes cash the fund manager highlights that a 20p coin would now have the purchasing power of 5p in 1982.
De Sausmarez advocates shares as a hedge against inflation damage even with the risk they can down as well as up.
“Crucially, shares have an important element of built-in protection against inflation because many companies are able to increase prices and protect their profits when the cost of living is rising.”