Recently released data from the Bank of England puts UK inflation at a 5 year high of 3.0% in September 2017. With ongoing uncertainty around Brexit negotiations continuing to make headlines in the UK press, the main contributors to inflation growth include the price of food and recreational goods. This rise in inflation may spur the Bank of England to raise interest rates next month, a move which commentators such as Matthew Brittain, an investment analyst at Sanlam UK, are viewing as “a near certainty,” as reported in the Financial Times.
In contrast to inflation, UK wages rose at an annual rate of 2.1 per cent in the three months to July, reducing the value of workers’ income in real terms. A Bank of England rate hike would result in bigger returns for savers, but increase repayment costs for many mortgage holders. As quoted in The Independent, Hargreaves Lansdown senior analyst Laith Khalaf notes that “consumer spending remains remarkably resilient … but the current squeeze on household budgets is a slow burner, as it takes some time for economic reality to hit home.”
If you hold an occupational or personal pension in the UK, and would like to understand how the UK’s evolving economic landscape may impact your investments, please contact us. We offer expert perspectives on the UK pensions’ landscape for British expats.