Research found that the ability to “live comfortably in retirement” was a primary goal amongst all UK investors which may go some way to explain why those approaching retirement age are more wary of the inflationary environment than those nearer the start of their investment road. James De Sausmarez, director and head of investment trusts at Janus Henderson spoke exclusively with Express.co.uk on how investors can combat inflation.
He said: “Saving and investing for retirement is something everybody should prioritise, regardless of age.
“Inflation is a worry for all. In order to mitigate against inflation, both younger and older investors should avoid cash, or cash equivalent, investments where interest rates are currently much lower than the rate of inflation. Instead, the focus should be on equity-based investments.
“Older investors should keep an eye on the investments that are providing the income stream that they will bank on during retirement.
“Investments, such as investment trusts, that have a history of regular annual dividend increases are best suited for this purpose as without dividend increases the real value of that income will be reduced by inflation.”
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Mr De Sausmarez suggested younger investors should have a greater focus on what may give the best total return from a well-diversified portfolio of equity-based investments over time.
This should alleviate the pressure of inflation, he said.
Research conducted by Janus Henderson found younger people were less concerned about inflation than those closer to retirement.
They found that the looming impact of inflation has motivated 30 percent of investors into making changes to their investment strategy to manage its effects.
But it is those aged 55+ that are found to be the least likely to have made changes (22 percent) – and just a quarter (24 percent) of those heading into retirement (aged 55-64) have done so.
Furthermore, almost half (48 percent) of those 55+ have not just declined to make changes, they also have no plans to do so.
“Living the lifestyle” is a dream that many people aspire to for retirement.
However, without careful planning, people may not be able to afford the life they want.
56 percent of investors cite “living the lifestyle I want in retirement” as a primary investment goal.
Mr De Sausmarez continued: “The research shows that those nearing retirement age are more concerned about the risks inflation pose, perhaps because they recognise that their planned income streams will need to grow at least in line with inflation if the real value of their retirement income is to be maintained.
“They are the least likely group to have made changes in response to the current environment as their investment portfolios may be positioned for their retirement needs.
“Conversely, younger investors, who have more flexibility and can take a longer-term view, were found to have been more proactive in making changes to their investments in direct response to the present circumstances.
“With interest rates so low, holding cash or cash equivalent investments will not protect against the current inflationary environment.
“Equity based investment vehicles such as investment trust companies are better able to do so as they offer the prospect of both capital and income growth.
“Investors who are uncertain about what to do should consult a financial adviser or other authorised intermediary.”
With investing comes risk.