The Inflation Calculator How far will your savings go on retirement?
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What does inflation mean for you?
It's a recurring topic in the news and has a major influence on your purchasing power - but do you understand the impact inflation can have on your future plans for retirement? Use our interactive calculator to find out.
What is inflation?
Inflation is the tendency of goods and services to increase in price over time. Assuming your income remains the same, this price hike means that your money won't go as far as it did previously.
For example, if you buy a bottle of milk for £1 this year and inflation sits at 10%, next year the same bottle will cost you £1.10, £1.21 the year after that, and so on.
If your salary stays the same, the amount of milk you can afford with your salary decreases.
Inflation is typically caused by one of two events:
- When the demand for goods and services rises more rapidly than the economy's ability to produce them. This is known as 'Demand-pull inflation'.
- When the price of producing goods and services increases due to changes in wages or the increasing price of the raw materials, known as 'Cost-push inflation'.
In the UK, inflation has fluctuated over the past decade, with a sharp decrease in recent years verging on deflation.
Inflation rates are not expected to stay low, however, with predictions suggesting a rise of up to 2% by 2018.
How will inflation impact me?
Inflation's impact on our daily lives is minimal. Where we we do need to take inflation into account is when planning for our retirement. On average in the UK, people enter retirement with approximately £87,000 in their pension pot.
Enter the amount you hope to save by the time you retire to see how inflation will impact its value between now and then.
Your ideal pension pot of £ will be worth £ in if inflation averages %.*
All prices are based on 2015 prices.
*please note that this figure does not take into account your pension pot's interest rate and is intended to illustrate the impact of inflation only.