FundsNetwork Warns on Savings Erosion

Retirement savings are at risk due to rising inflation rates, FundsNetwork has warned.

The investment specialists said today that regular contributions pension funds could have some of their value eroded, due to them being fixed at a flat rate. This means that customers are advised to increase their contributions by at least the rate of inflation each year, in order to be assured that their overall pensions pot should not lose value.

FundsNetwork's comments come in the wake of a gloomy inflation report from the Bank of England. Following the announcement that the government's inflation benchmark (known as the Consumer Price Index or CPI) had risen to a higher-than-expected 3.3 per cent, the institution indicated that the rate could exceed four per cent in months to come - doubling its own pre-set target of two per cent.

Rising food and fuel prices, combined with the effects of the ongoing credit crunch, have been blamed for this trend.

David Dalton-Brown, head of FundsNetwork, said: "We haven't really had to worry too much about inflation over the past decade. The Bank of England has been very successful at keeping the CPI close to its target of two per cent. However, rising fuel and food prices are pushing up inflation around the world [and] there is a real danger that many retirement plans will go off track if regular contributions are not increased."