Don’t give Edam about your pension? Think Caerphilly!
What do pork pies, children’s tricycles and a chunk of Edam cheese all have in common?
Not much – except that they have all been removed from the official ‘shopping basket’ used by the Office for National Statistics to calculate the inflation rate.
In their place are such essentials as quiche, prepared mashed potato and body moisturising lotions.
The reason this all matters is that your pension investments must match price rises if you want to be able to afford the things you’ve planned for in retirement.
Will you have enough in your pension fund to afford what’s in the annual inflation basket?
If your investments aren’t at least keeping pace with the inflation rate, then you’re losing money and your pension will be hit accordingly.
The ‘shopping basket’ items are reviewed every year to make sure they reflect consumer spending patterns, keeping the Consumer Price Index (CPI) bang up to date.
In 2018, 15 items have been added to the CPI ‘shopping basket’, 14 items have been removed and seven have been modified.
As well as giving civil servants an accurate measure of inflation, the items provide a fascinating insight into the changing retail habits and socio-economic patterns of us Brits.
I was disgusted to find that Edam cheese is out! Removing pork pies is rubbing salt into the wound!
In their place come Go-Pro action cameras, raspberries and women’s active wear leggings – which I can attest to the growth of by their number in my household!
In another sign of the times, cash machine bank charges have been removed from the CPI basket, along with a bottle of lager in a nightclub and full leg waxes.
At Carrick Financial Management, we’re not suggesting to clients that the price of bodily hair removal was ever an essential cost to dictate the management of their pension investments.
But as part of the relationship we build with our clients, we do advise that pension investments at the very least need to be able to cover the cost of day to day living expenses.
Food and consumer goods are at the very heart of that and pension investments need to keep pace with their inflationary change.
Quiche and prepared mashed potato, followed by raspberries, might not be a meal to everyone’s taste.
But their presence as new additions to the CPI ‘shopping basket’ serves as a wider point to seek professional financial advice to make sure you have the pension funds available in later life, so that you can have your cake and eat it.