Press releases

MORE UK CONSUMERS EXPECT INFLATION TO ERODE EARNINGS AND SAVINGS ACCORDING TO LEGAL & GENERAL MONEYMOOD SURVEY.

Mark Gregory - Group Chief Financial Officer
Mark Gregory
Group Chief Financial Officer

21 May 2013

Mark Gregory - Group Chief Financial Officer
Mark Gregory
Group Chief Financial Officer

Legal & General’s latest MoneyMood survey shows a big jump this year in the number of people who expect inflation to reduce the value of their savings and are likely to receive lower than inflation pay rises compared to last year.

Six out of 10 adults surveyed (59%) said they expected their earnings would fall behind inflation over the next 12 months, compared to 4 in 10 (38%) at the same time last year.

However, the biggest change is in the number of households who say they expect their savings to fall behind inflation over the next 12 months. Eight out of 10 households (78%) say they expect their savings will grow by less than inflation compared to only 3 in 10 (29%) last year.

Pressure on earnings, erosion of savings

MoneyMood Survey ® - How do you expect your earnings and savings to compare with inflation this year?

To view the chart showing the change in the number of households who expect inflation to impact on savings and earnings please click on the link on the right of this page.

Commenting on these figures Mark Gregory, Legal & General Chief Executive Savings said; “For many households the latest ONS report saying inflation remains stubbornly high will be no surprise.

The big change is that many more households have come to realise that they have to deal with high inflation combined with low interest rates, largely as a result of the Bank of England policy on QE.  

While low interest rates are good for borrowers, when inflation remains high that does come at a price for savers.

It is worth remembering that wage growth has been well below inflation (according to the ONS) for most of the last four years.

Our latest figures show 6 out of 10 households expect their income to fall in real terms over the next 12 months as well.

Savers are also increasingly aware that the combination of low interest rates and high inflation reduces the value of their savings and hits income for those who depend on their savings to provide extra cash.

Since the Bank of England started cutting the base rate the “typical” savings rate has plummeted. 

Our MoneyMood research shows 8 out of 10 households expect the value of their savings to fall again over the next 12 months. 

People will either have to save more or look to save in different ways, or both to combat inflation.”

More of the same:

In May last year the Bank of England Governor, Mervyn King, told us he anticipated inflation to be higher than the BoE 2.0% target over coming months. At that time CPI inflation was 3.0% (April 2012).

Today (Tuesday 21 May), ONS reported CPI fell in April this year. However, the Bank of England's quarterly inflation report, published last week, predicts that inflation will peak above 3% in the third quarter of 2013.

This is no longer ‘news’ to the average man in the street.

Last year 9 out of 10 households (88%) in our MoneyMood survey said they expected inflation to be higher or to stay the same over the next 12 months. This year the number is virtually unchanged at 90%.

Nine out of 10 households expect inflation to stay the same or go up:

MoneyMood Survey ® What do you think is likely to happen to inflation over the next 12 months?

To view the chart showing expected inflation please click on the link on the right of this page.

REGIONAL DATA – How do you expect your earnings/savings to keep up with inflation?

Thinking about “earnings” several regions showed a higher proportion of people who felt that their earnings would fall behind inflation than the national average – most notably London (65%), Wales (66%), East Anglia (65%), Yorkshire and Humberside region (61%) and the North East of England (64%).

Interestingly, when thinking about their savings and perhaps due to the variation in demographic make up of the regions, different regions showed higher numbers of people worried about the impact of the falling value of their savings than the 78% figure for the UK as a whole – the South West (82%), West Midlands (84%), the North East (82%) and Scotland (85%) showed more people worried that their savings would not grow as fast as inflation this year.

MoneyMood Survey ® - How do you expect your earnings to keep up with inflation this year?
Answer – “My earnings increase will be less than inflation”

MoneyMood Survey ® - How do you expect your savings to keep up with inflation this year?
Answer – “My savings will not grow as fast as inflation”

To view these charts please click on the links on the right of this page.

SURVEY – METHODOLOGY

Research for the Legal & General MoneyMood Survey was carried out by TNS Omnibus.

Telephone interviews were conducted among a nationally representative sample (in GB) of around 1,000 adults (age 18+) on 20-23 April 2012 and 26-28 April 2013.

Notes to editors

The information contained in this press release is intended solely for journalists and should not be relied upon by private investors or any other persons to make financial decisions.

The Legal & General Group, established in 1836, is one of the UK’s leading financial services companies. As at 31 December 2012, we were responsible for investing £413 billion worldwide on behalf of investors, policyholders and shareholders.  We also had over seven million customers in the UK for our life assurance, pensions, investments and general insurance plans.

The Legal & General MoneyMood Survey is registered by Legal & General plc.


For more information please contact:

Mike Connolly

Mike Connolly

About Legal & General

Legal & General Assurance Society Limited.

Registered address:
One Coleman Street
London EC2R 5AA.
Registered in England 166055.

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