Any thoughts on inflation?

Thrugelmir

Workerdrone said:

Nebulous2 said:

I'm not sure if the pension forum is the right place for this discussion, but I'm doing ----- nothing. 

Seems pretty unfair to those of us who have cut out cloth as fine as we can to save as much as possible. The value of your money being eroded then an unfair cap in the form of LTA. If ever there was a good reason to scrap LTA altogether this is it. There are already limits on what tax relief can be gained. Its just a penalty on savvy investing.

Bet you aren't going to complain about the return on your investments though. There never was a free lunch. More debt now than at the time of the global financial crisis. Chickens are finally coming home to roost. 

Andy_L

Stubod said:

..yes I think higher inflation is now inevitable given the dramatic rise in energy costs and also council tax, (which I understand is not included in CPI calculations for reasons I don't really understand. The reality is that higher energy costs will also impact most other things that you buy. Also the government wants businesses to pay more to compensate for the recent reduction in universal credit, and would like to see the UK become a "high wage" country, and all this will have to be paid for?

As for what we are doing, there is not a lot we can do really except reduce any unnecessary "discretionary" spending.

Looking at our expenditure spreadsheets for the last 20 odd years has shown little change in our actual annual spend. (We had planned to spend more during our earlier years of retirement but covid has put a hold on that for the last 2 years anyway!)

AIUI CPI was designed as an international standard. Because there are  big differences in how housing markets work between countries most housing costs are left out.

Council tax (and other housing costs) are the included in the CPIH index

JohnWinder

Workerdrone said:

If the future value of money is to be eroded what actions if any are you taking now?

It was always going to be eroded by inflation if the last few hundred years are anything to go by, despite us having short periods of the opposite. That's the first thing that hasn't changed.

The second is that people are always making predictions about the future, particularly when it sells newsprint, financial services or investment products. And those predictions are far too frequently wide of the mark for most of us to profit from. So nothing new there, either.

Putting aside 'taking a second job' or 'delaying retirement' or 'belt tightening' type actions, and just sticking to the investments, you probably should be taking no action(s). That's because you set up your portfolio knowing inflation was always a risk, and knowing that you'd never know how bad or for how long it would last; just as your plan addressed other risks like a stock market collapse lasting a decade or your local currency go down the gurgler etc. A well thought out investment approach will never give the best rewards in all circumstances: fabulous during inflation; prize winning during deflation; top of the pops during a currency crisis etc. Don't expect it to.

So, nothing's changed and you had a good plan, why would you change it now when we know market timing, predicting interest rate changes etc are extremely difficult to use to beat market returns? Sit tight, and tune out of the noise.

SouthCoastBoy

Inflation and council tax are both concerns for me. I think inflation (CPI) will reach around 7%, however my rate of inflation could go even higher. How do I mitigate this? I have positioned some of my portfolio into holdings I think will be able to pass on the costs, and therefore could do relatively well in an inflation run, however to perform well in an inflation run they will also they need to have either low level debt, or long term debt that is fixed at the low interest rates we are currently experiencing.

Council Tax, IMO this is going to really bite in the next few years, will be interesting how the electorate will react. Currently we seem to be experiencing rates of around 3%(if not more) above CPI, so if CPI gets to 7% that will be a 10% increase, with these rates compounded over a few years it will soon get ridiculous. Already after food it is my greatest expense. Luckily I do have a hedge against council tax, my wife has a DB pension (LGPS) of around 3k per year, so I have made the assumption this will be used up by council tax (our current council tax is approx £2200 for a band D property),hopefully it will keep up, or close to the council tax rises

Workerdrone

SouthCoastBoy said:

Inflation and council tax are both concerns for me. I think inflation (CPI) will reach around 7%, however my rate of inflation could go even higher. How do I mitigate this? I have positioned some of my portfolio into holdings I think will be able to pass on the costs, and therefore could do relatively well in an inflation run, however to perform well in an inflation run they will also they need to have either low level debt, or long term debt that is fixed at the low interest rates we are currently experiencing.

Council Tax, IMO this is going to really bite in the next few years, will be interesting how the electorate will react. Currently we seem to be experiencing rates of around 3%(if not more) above CPI, so if CPI gets to 7% that will be a 10% increase, with these rates compounded over a few years it will soon get ridiculous. Already after food it is my greatest expense. Luckily I do have a hedge against council tax, my wife has a DB pension (LGPS) of around 3k per year, so I have made the assumption this will be used up by council tax (our current council tax is approx £2200 for a band D property),hopefully it will keep up, or close to the council tax rises

It's my understanding that there is a limit which they are allowed to raise council tax in a single year without triggering a referendum. I can't recall if its 3% or 5%. I don't believe a single council has yet dared trigger a referendum. These figure exclude the parish precept which makes the whole exercise pointless as things can just be lumped into that. I agree though. Several years of maximum rise in CC compounded. Its getting silly now. I'd like to see some more efficiency in my local council. No more 5 men stood around a hole, 4 of them on mobiles. No more silly money for senior council officers. etc

SouthCoastBoy

Yes there is legislation that above 5% (or thereabouts) triggers a referendum, that can soon be changed though (I think the threshold is set yearly). IMO council tax is an awful tax as not based on the ability to pay.

Thrugelmir

Workerdrone said:

SouthCoastBoy said:

Inflation and council tax are both concerns for me. I think inflation (CPI) will reach around 7%, however my rate of inflation could go even higher. How do I mitigate this? I have positioned some of my portfolio into holdings I think will be able to pass on the costs, and therefore could do relatively well in an inflation run, however to perform well in an inflation run they will also they need to have either low level debt, or long term debt that is fixed at the low interest rates we are currently experiencing.

Council Tax, IMO this is going to really bite in the next few years, will be interesting how the electorate will react. Currently we seem to be experiencing rates of around 3%(if not more) above CPI, so if CPI gets to 7% that will be a 10% increase, with these rates compounded over a few years it will soon get ridiculous. Already after food it is my greatest expense. Luckily I do have a hedge against council tax, my wife has a DB pension (LGPS) of around 3k per year, so I have made the assumption this will be used up by council tax (our current council tax is approx £2200 for a band D property),hopefully it will keep up, or close to the council tax rises

It's my understanding that there is a limit which they are allowed to raise council tax in a single year without triggering a referendum. I can't recall if its 3% or 5%. I don't believe a single council has yet dared trigger a referendum. These figure exclude the parish precept which makes the whole exercise pointless as things can just be lumped into that. I agree though. Several years of maximum rise in CC compounded. Its getting silly now. I'd like to see some more efficiency in my local council. No more 5 men stood around a hole, 4 of them on mobiles. No more silly money for senior council officers. etc

Our local council is proposing that CT will rise by 5% next April and the two subsequent years. Such is the damage to finances caused by the pandemic. 

Eldi_Dos

Did order last night for our click and collect,several of our regular item's up by between 12 and 20%, admittedly after long period of stability. Going to need to watch inflation of everyday cost's like a hawk this winter.

jim8888

Eldi_Dos said:

Did order last night for our click and collect,several of our regular item's up by between 12 and 20%, admittedly after long period of stability. Going to need to watch inflation of everyday cost's like a hawk this winter.

Yeah, have you noticed all the big promotions vanishing too? No Half Price deals, BOGOFs etc.. As an aside, I haven't been able to buy Own Label tomato juice in Tesco for about two months. Having worked in that sector for years, as a manufacturer short delivering Tesco on Own Label is a death sentence. I could buy V8 juice as an alternative (and do) but it's twice the price. Can't find any in Lidl either....

SouthCoastBoy

Eldi_Dos said:

Did order last night for our click and collect,several of our regular item's up by between 12 and 20%, admittedly after long period of stability. Going to need to watch inflation of everyday cost's like a hawk this winter.

Yes, totally agree, I always think the CPI is no real indication of my personal inflation rate. Food, council tax, energy and petrol are my main costs, all these seem to be rising more than the current CPI figure.