CPI inflation has risen to 2.1% contradicting earlier predictions that it would fall to 1.9% and is above the Bank of England’s 2% target.

Steven Cameron, pensions director at Aegon, said: “The latest inflation rate of 2.1% pushes it above the Bank of England’s 2% target for the first time since April and as the scheduled Brexit day fast approaches, is a timely reminder of the potential for prices of goods and services to rise faster in future.

“Fortunately, yesterday’s figures from DWP also show a continued strong labour market, so working households are in a relatively good position to plan ahead and save for the future, especially if earnings increases continue to outstrip price inflation.

“However, it’s fixed income pensioner households who are at greatest risks of accelerated price inflation.

“Those in retirement also spend their money on different things and if a disproportionate amount of their income is spent on the items that rise fastest, the effective pensioner inflation rate could be higher than that of workers.

“Anyone about to enter retirement needs to build this into their planning to maintain their standard of living whatever the rate of future price inflation.
 
“The spending power of money tied up in savings accounts is also eroded by rising inflation, so unless people can find an account paying above the rate of inflation, which is extremely challenging in today’s environment, money in savings accounts is effectively worth less year on year or in real terms, earning negative interest.”