Rising inflation heaps stress on Brits as bills continue to rise
Today's announcement by the Bank of England that inflation hit 5.2 per cent in September, the highest level for three years, adds further pressure to the many households across the UK that have been struggling with the rising cost of living - with rising energy and food bills hitting wallets particularly hard.
Research from MoneySupermarket.com has revealed that 71 per cent of British consumers will need to turn to their savings, credit cards or overdraft to fund rising bills. As we come into the colder months, the majority of consumers will be feeling the impact of recent energy prices rises which added an average 17.4 per cent to the cost of gas and 10.8 per cent to the cost of electricity, resulting in average annual standard bills of £1,287.
Additional research found that UK adults are so stretched financially due to the rising cost of living that a quarter (26 per cent), almost 13 million people, say they now instantly get stressed or worried whenever they receive a bill. Of those that feel stressed and worried about opening their bills, over half (54 per) said the biggest cause was the simple fact that bills just keep rising, meaning they struggle to know how much they will be and how to deal with them. Nearly a third of those worried (31 per cent) panic because they have more money going out of their current account than they have coming in every month.
Aside from rising living costs, inflation is also having a huge effect on the nation's savings pots. To beat inflation, basic rate tax payers now need an account paying at least 6.51 per cent to gain benefit in real terms from their savings, increasing to 8.68 per cent for higher rate tax payers, and 10.41 per cent for 50 per cent tax payers.
One glimmer of hope from today's figures is the rise in the Consumer Price Index (CPI) will mean an increase in some state benefits and pensions from April next year, as inflation linked increases are based on September's CPI figures.
Kevin Mountford, head of banking at MoneySupermarket.com said: "The rising cost of living is something UK adults have had to bear the brunt of over the last 12 months, with rising energy, fuel and food costs putting significant pressure on the nations' wallets. The recent ‘energy summit' shows the government's focus on getting consumers to reduce their energy bills, but this will come as little comfort to those customers who are struggling to pay their current bills and don't know which way to turn.
"Now definitely isn't the time to be apathetic. If you're in a position where you cannot see a way out then don't bury your head in the sand; sit down and review at all of your outgoings to make sure you are on the best deal for your circumstances. Cutting unnecessary expenditure on household bills can go some way to help reduce the financial stress. Take the time to switch as the savings could be far greater than anticipated.
"For savers, the low number of products which currently offer a return above inflation, means keeping a closer eye on their interest rates. Being prepared to switch savings products is now more important than ever. Even if savers can't beat inflation, the difference between the average and top paying rates is considerable, so switching to a better deal can help to limit the impact on their savings pots."