The Consumer Prices Index (CPI) fell to 6.7 per cent in the 12 months to August 2023, down from 6.8 per cent in July, according to The Office of National Statistics.
Food prices, which rose less in August 2023 compared to the previous year, and accommodations, which had price instability and a fall in August 2023, were the main drivers of lowering the monthly change in inflation rates.
Standard Life managing director for retail direct Dean Butler says: “After a tough couple of years of squeezed living standards it’s nice to see some light at the end of the tunnel with inflation now below the rise in average earnings.
“However, it’s fair to say not everyone will be feeling the benefit, particularly with meteoric interest rate rises continuing to put pressure on household finances. If you do find yourself with even a small amount of spare cash, it may be worth considering topping up your short or long-term savings. A more positive side effect of rising interest rates has been better returns on cash savings, with some best-buy accounts now offering rates not too far off inflation.
“It’s recommended everyone has three to six months’ worth of their salary in an easy access ‘rainy day’ savings account, to meet those sudden unexpected events that come up in life. If you’ve got this covered, it’s worth considering putting a bit more into a longer-term savings option, such as a pension.
“Even a small increase in your contributions has the potential to make a big difference later in life, boosting your standard of living in retirement. Our recent calculations found that just a 1% increase in contributions could lead to a £58,000 boost to your pot.
“As pension plans are invested, they provide the opportunity for the pot to grow – and for further gains on that original growth, known as compound investment growth, giving them the potential to beat the rate of inflation. It’s still a tough time for many – but if you possibly can, saving for your future is likely to pay off in the end.”