UK inflation (CPI) grew by 3% in January 2018, unchanged from December 2017. This rate of inflation leaves UK households collectively needing to find an extra £23.5bn a year to maintain their standard of living compared to 12 months ago, according to Retirement Advantage.

Each household will typically need to spend an extra £864 a year to maintain their standard of living compared to a year ago.

Retirement Advantage pensions technical director Andrew Tully said: “Inflation is the hidden force that can wreak havoc with household budgets and retirement plans. The latest numbers will leave people reeling and will hit living standards as we will all need to find that little bit extra to make ends meet. With wage growth stagnant, and inflation predicted to remain close to recent rates in the short term, the squeeze on living standards will continue.

“For people living off a fixed income in retirement, inflation of 3% will halve spending power in just 20 years. Recent market turmoil has shown that using drawdown to deliver retirement income is not without risk and a strategy that creates breathing space when markets take a wobble and helps mitigate the effects of inflation is the ideal.”

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