‘How do I stop inflation erasing my life’s work?’

Money is losing its value and one saver knows first hand how damaging it can be. Lauren Almeida seeks an antidote

Rising prices are the chief concern for the world’s biggest institutions. Alongside savers and consumers, central banks, businesses and governments are all braced for further pressure on the cost of living. In Westminster, Rishi Sunak, the Chancellor, said the public should prepare for prices to rise by 4pc next year. However, in Hertfordshire, 77-year-old Patrick Lawson*, whose career was in facilities management, has been worried about inflation for decades.

In 2011 he even wrote to Mervyn King, the former governor of the Bank of England, to voice his concern about the drift towards a stagnant economy and rising prices. “I didn’t expect him to reply,” Mr Lawson said. “But he sent me a very comprehensive response. Inflation has always been a worry for me. In the 1970s it destroyed everything my father had worked for, and by the 1980s my siblings and I were supporting my parents.”

Having seen the effect on his family, Mr Lawson is determined not to have his own wealth ravaged by rising prices. “I don’t want to become a burden, and instead want to pass something on to my three adult children,” he said. “I have never invested before, even though I know I should have, and kept a lot of my money in cash, fearing some monkey would crash the whole system. But I am open to trying it if it means I can protect what I have now.”

Some £ 76,000 of his money y is held in bank accounts and cash Isas, with another £ 30,000 in Premium Bonds. Mr Lawson does, however, have £6,000 in gold sovereigns eigns – the precious metal is a traditional nal hedge against inflation.

He added: “My outgoings are modest and we don’t usually y go on big holidays, other than to visit my son who lives in New Zealand. I don’t have expensive hobbies – I might spend a bit here and there on office supplies for the local history project I am working on with Cambridge University.”

Mr Lawson has been working with academics to o date local heritage properties in his area, Royston, which go as far back as the medieval era. “That is something I want to continue to do. It makes me happy,” he said.

Mr Lawson and his wife, who is 73 and also retired, do have inflationprotected income through various pensions, including those from the state. They receive £27,000 a year, although most of this is tied to Mr Lawson, and have outgoings of around £16,000.

Philip Milton

Chartered wealth manager at Philip J Milton & Company Mr Lawson and his wife are still young in life- expectancy terms. Their pensions provide a good income, most of which has inflation-linking, but if Mrs Lawson were to outlive her husband her income would shrink dramatically. Preserving savings to support her is imperative. Mr Lawson does hold gold sovereigns but, frankly, he should sell them. If he wants to own gold as an inflation hedge, a fund that tracks the gold price is safer, cheaper and easier to manage. A good option is the WisdomTree Physical Gold Daily Hedged ETF. The best way to protect against inflation is to invest. Mr Lawson has £50,000 in cash Isas, which he should convert to a stocks and shares Isa and add £20,000 using this year’s Isa allowance. After April 5 he should invest another £20,000. This would still leave an ample cash reserve for emergencies. I am an old-fashioned “value” investor and believe it is sensible to own a good range of shares. Mr Lawson should invest in companies c that have control over their prices, so that as inflation rises so too will their profits – and in all probability probabi their share prices. There Th are some attractive shares sh on the London market k that offer this, including GlaxoSmithKline, Reckitt Benckiser, Vodafone, BT, Tesco and Sainsbury’s. But it is important to be diversified and not excessively own any single fund, type or sector. Some good starter investment trusts are Henderson Diversified Income, Aberdeen Diversified Income & Growth and M Miton Global Opportunities. Ia I also like trusts that invest in pro property, such as BMO Comme mercial Property.

Amyr Rocha-Lima

Partner at Holland Hahn & Wills, the wealth manager Mr Lawson is in a great place. He has clarity over his expenses, covered by his inflation-linked secure income from his pensions. He also has enough surplus cash to cater for his short- term requirements.

There is only one reason for a longterm investor to keep a large proportion of their wealth in cash: because they fear that the return from another investment would be worse.

Cash should not be used to generate a return but to prevent losing money elsewhere.

Mr Lawson is right to be concerned about inflation, which has been born of a very powerful post-pandemic economic boom, short-term supply chain crises and the lingering effects of money printing policies.

However, other than as a reserve for

emergencies and short-term requirements, cash is an irrational longterm investment. This is true simply because, after inflation and taxes, cash virtually always produces a negative return.

A financial plan will give Mr Lawson clarity about what he needs to secure his and his wife’s personal well-being and to avoid becoming a burden to his family. It will also help him with estate planning goals in a tax- efficient way. Let’s deal with each of these goals in turn.

First, Mr Lawson has stated that he is comfortable with his level of income, so a portfolio that includes a mix of growth and income investments is a sensible way forward.

Second, on the point of giving money to his children, Mr Lawson should begin to think of what his wealth might mean to his children and make financial gifts to them during his lifetime instead of after his death.

He could start to make use of his annual exemption, which is a useful way to give away money.

Every year you get a £3,000 allowance and Mr Lawson could use it to make a gift as a lump sum or split it into smaller amounts throughout the year. Any unused allowance can be carried forward one tax year, giving him an increased limit of up to £6,000.

His wife would qualify for her own allowance too.

Patrick Lawson’s main hobby involves work on a project with Cambridge University on Royston Cave