It's £1,000 each period of time. What was the subject?

10 May 2016

We live in a low inflation economy, which has some benefits, but also causes some problems along the way. You only need to speak to deposit savers who have seen interest returns reduce to minimums to know more on this. The Bank of England seems to be under no pressure to raise base rates, and the economic data that is currently available keeps their monthly rate decision further away. There is no guarantee that rates will not move, but it is not looking as though 2016 will see any significant variances. Indeed, I am not convinced that any EU referendum result will make much change, other than to make Sterling a little weaker in the short term, which might put the cost of your foreign holiday up because of the exchange rates.

It is also interesting to note that in many personal experiences of our clients, the inflation rate applied to long term care costs, about £1,000 per week, and private school fees, about £1,000 per month (£3,000 per term) can be higher. Those who have to bear the costs for both the older and the younger generations can find the burden significant. £1,000 per month might simply be your target income in retirement from your private plans, when adding on the State Pension.

If inflation returned to past rates (7.21% pa in 1991, 17.24% pa in 1979, 24.89% pa in 1975 / inflation rate based on the Consumer Price Index: http://www.inflation.eu/inflation-rates/great-britain/historic-inflation/cpi-inflation-great-britain.aspx) the costs above could increase at eye-watering levels. Bank base rates would then probably be used to control consumer spending (as the preferred economic tool of choice in the past) and this would see the current low mortgage borrowing costs disappear. This is something many new homeowners have no knowledge or understanding of.

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Why are the points above important? Because when you add on the usual economic burdens of family costs or saving for retirement, making the most of your money through good financial planning holds great value. Even if you have achieved this in the past, regularly reviewing your plans and objectives is important.

If you would like to know more, then please contact the team at Chapters Financial in either of our Guildford or Woking offices to help plan your needs now, and into the future so that when the cost of £1,000 per period comes up, you should be ready.

No individual advice is provided during the course of this Blog.

Keith Churchouse FPFS
Director
Chartered Financial Planner
CFP Chartered FCSI
ISO22222 Certified

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