Skip to main content

Do I need to protect my savings against inflation?

With UK inflation (as measured by the consumer price index) currently at 5.1% and the Bank of England base rate at 0.25% (as at December 2021), the value of cash savings is being eroded by 4.85% a year.

And with The Bank of England expecting inflation to reach 6% in 2022, the situation looks set to worsen if you are holding your wealth in cash.

This article explains how serious a threat inflation is to the value of your cash – and how you can protect your savings against inflation by investing.

How is inflation eroding the value of savings?

To understand the effect inflation can have on the value of cash savings, let’s look at what would have happened to the real (after inflation) value of £1,000 cash deposited ten years ago in an account paying interest at the Bank of England base rate.


Over the ten-year period, the real value of that cash would have fallen from £1,000 to less than £880 – a loss after inflation of more than 12%. That’s because, for much of the period, the rate of inflation outstripped interest rates.

If inflation remains higher than interest rates, cash will continue to lose its value.

Can savings beat inflation?

Savers with sterling cash deposits will see the real value of this cash eroded due to inflation. However, there are alternatives.

Let’s compare the return of the £1,000 cash with the return of some diversified investment portfolios over the exact same period. The graph below shows the performance of three of Canaccord Genuity Wealth Management’s largest and most popular model investment portfolios, alongside cash over the same ten years.


Past performance is not a reliable indicator of future performance.

The £1,000 initial investment has grown up to £1,590 – a 59% gain – in the higher risk, higher return risk profile 6 model portfolio, after taking inflation into account. The return also includes a representative management fee.

All our model portfolios outperformed cash over the same period, so investing in our diversified portfolios clearly gave a much better return over the ten years than cash, protecting our investors’ wealth from inflation.

While past performance is no guarantee of future performance, with inflation potentially rising further while interest rates remain low, savers with cash in the bank might want to consider ways to protect against inflation.

What is a risk profile?

In an investment context, risk is a measure of the extent by which investment returns may deviate from expectations. As it is impossible to predict future events with any certainty, all investment involves risk.

At CGWM, we recognise that all investors have different attitudes towards, and tolerance of, investment risk. We have created nine different risk profiles to help us discuss and agree the appropriate level of risk for each client's individual circumstances. Our risk profiles are numbered from one to nine, with nine being the highest risk and one the lowest. Generally, the greater the risk, the greater the potential return – but also the greater the possible loss.

Find this useful? Read more about inflation: 

Get in touch to speak to a professional wealth adviser and see how we can help protect your wealth from inflation with confidence.

Speak to one of our investment experts

To discuss your investment needs, book a complimentary, no-obligation consultation.

Request a consultation

Investment involves risk. The value of investments and the income from them can go down as well as up and you may not get back the amount originally invested. Past performance is not a reliable indicator of future performance.

The information provided is not to be treated as specific advice. It has no regard for the specific investment objectives, financial situation or needs of any specific person or entity.

Charts are for illustrative purposes only and should not be relied upon for any other reason. Information is correct as at date of publication.

The information contained herein is based on materials and sources deemed to be reliable; however, Canaccord Genuity Wealth Management makes no representation or warranty, either express or implied, to the accuracy, completeness or reliability of this information. All stated opinions and estimates in this document are subject to change without notice and Canaccord Genuity Wealth Management is under no obligation to update the information.
Photo of Justin Oliver

Justin Oliver

Deputy CIO

Justin provides direct assistance to the Chief Investment Officer in maintaining responsibility for the investment philosophy, process and methodology of Canaccord Genuity Wealth Management, and acts as the alternate to the CIO. He is Chairman of Canaccord Genuity Wealth Management’s Portfolio Construction Committee, a member of the Asset Allocation and Fund Selection committees and manages several of Canaccord Genuity Wealth Management’s Select range of funds. Justin is a Chartered Fellow of the CISI and is a former President of the Guernsey Branch of the Institute.

+44 207 523 4963

Investment involves risk and you may not get back what you invest. It’s not suitable for everyone.

Investment involves risk and is not suitable for everyone.