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Returns outside of cash – a hedge against inflation

27th Dec 2023
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Following a sustained period of abnormally low inflation, the more recent upsurge in price pressures has vividly highlighted the impact inflation can have on people’s finances. A sharp rise in the cost of living takes a large chunk out of the purchasing power of your money and thereby erodes the real value of cash savings.

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This isn’t a short-term problem. In December, during their final meeting of 2023, the Bank of England’s Monetary Policy Committee (MPC) voted by a six to three majority to retain Bank Rate at 5.25%. With Bank Rate currently remaining at a 15-year high, the Governor of the Bank of England, Andrew Bailey, said that it is “too early” to speculate about when UK interest rates will be cut, adding, "I don't think that we can say definitively that interest rates have peaked. I hope that we are at the top of the cycle." Mr Bailey added that there is still a “persistent element to inflation which we have got to take out.

High inflation is not going away

From an inflation perspective, the MPC’s December summary outlines that Consumer Prices Index (CPI) inflation is expected to stay close to its current rate until around the turn of the year, with a temporary increase in service price inflation expected in January. The report reiterates that, ‘Monetary policy will ensure that CPI inflation returns to the 2% target sustainably in the medium term.

How to help clients with high cash balances

These figures grab the headlines, but something that is often overlooked with inflation is the impact on cash. If you or your clients are holding high levels of cash, whether these balances are held in Individual Savings Account, deposit account, pension or in a business account, and you can take a three-year view or longer, then you should seek advice to provide a hedge against inflation. It is important to consider all options, including the use of appropriate tax wrappers to protect the value of your or your clients’ money for the future. Inflation is one of the biggest risks to cash savings as it is effectively a hidden tax on the value of cash and assets.


For a discussion about inflation and your savings, you can book directly into my diary, send me an email, or call on 0208 6182077.

[email protected]

Contact number – 0208 6182077


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The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.