‘This is the kind of inflation that is felt by almost everyone’

Inflation that starts with a ‘5’ means budgeting like never before for Britons.

The Consumer Price Index rose to 5.1% in the 12 months to November, up from 4.2% a month earlier. The ONS said the contributing factors behind the rise were ‘broad-based’ but transport, especially the cost of petrol, was a big contributor.

Becky O’Connor, Head of Pensions and Savings, interactive investor, said: “People are watching the prices of everyday necessities rise before their eyes. This is the kind of inflation that is felt by almost everyone, although clearly those on low and fixed incomes such as pensioners, face the toughest struggle to keep their standard of living within their budget.

“Budgeting will need to be turbo-charged for those with little disposable income left at the end of the month. It could push some people further into regular overdraft and credit card use, or result in some families being unable to pay their bills. People who have been relatively relaxed about the need to budget in the past may also need to consider belt-tightening.

“With inflation leaving interest rates on cash savings in the dust, it becomes very hard to store money safely and still get any kind of return. Money held in savings is consistently losing value. For those that can invest for longer periods and don’t need so much cash at the ready for emergencies, investment in the stock market through ISAs is worth considering. It may also be worth reviewing the return on your pension funds and the risk profile of the investments in it. It’s important that pension investments beat inflation over the long term to safeguard retirement plans.”