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We’ve just made it through to the other side of the pandemic, a time of great financial struggle for many. And now, we've received the news that these turbulent times are set to continue. The cost of living is rising in 2022. Inflation rates will be increasing, energy prices are on the up, and national insurance changes will affect us all.
Financial pressures are a major stressor in life for many people. Managing bills, mortgage or rent payments, and living expenses isn't always easy. And that makes the announcement of these changes even more of a source of anxiety, stress and apprehension. If you’re worried about the cost of living increase—know that you’re not alone.
Deciphering the ocean of information on the topic can be confusing, draining and exhausting. So we’ve put together a simple guide on the upcoming changes and provided some tips on easing your worries.
The rate of inflation is a figure provided by the Bank of England. This figure tells us how the prices of goods and services are changing over time. They calculate this figure by reviewing a basket of over 700 items, looking at how prices of these items increase or decrease over time.
In December 2021, inflation reached its highest recorded level in decades. People struggled to afford the things they were once able to buy. And as we move into 2022, the Bank of England forecast inflation is set to reach around 7%.
Rising inflation rates are partly a result of the recovery from the pandemic. But, this increase is also a result of challenges faced by importing goods from abroad. Energy prices have soared in recent months too, which will add fuel to the rising inflation rates.
Well for one, you’re likely to find yourself paying more for goods and services. And secondly, to prevent inflation from continuing to rise, the Bank of England is putting interest rates up.
Interest rates are the reward people get for saving and the amount it costs to borrow money. So if interest rates rise, it encourages people to spend less and save more, bringing prices—and inflation rates—down.
The Bank of England predicts that this change will bring inflation rates back down to 2% over the second half of the year and into 2023.
The cost of energy has almost quadrupled in the past year. Ofgem, the industry regulator, report that gas prices have gone up by 28% and electricity prices by 19%. Because of this, the energy price cap will also rise by 54%.
The energy price cap ensures supplies are charging customers reasonable rates for their energy by setting the maximum amount they can charge. Energy prices have soared, meaning that the energy price cap will too. Suppliers will need to charge more, meaning that customers will pay more as a result.
The Government have also announced that there will be an increase in national insurance contributions that will go towards health and social care. There will be an increase of 1.25%, which will add even further financial stress to an already challenging time.
The various components contributing to the cost-of-living increase are likely to cause stress for many people. And although it might be a difficult year for finances, there are support tools available. We must also support each other during this time and take steps to manage any money worries you might have. Find our top tips below.
The industry regulator Ofgem is working with energy supplies to ensure that customers get the support they need. Contact your energy supplier as soon as possible if you’re worried about paying your bills. Extra help is available via repayment plans, payment breaks and support schemes. You just need to reach out to see what your supplier can offer you.
The charity Step Change offers free debt advice to help you get back on track. They provide a range of services and information you can access free of charge to take action and overcome your debt—step by step. There’s information on debt collection, solutions, credit cards and budgeting. Plus, you can access a range of FAQs that break down complicated topics into easy to understand info.
The best way to feel more at ease with the upcoming changes is by planning how you’ll adjust your budget to compensate. If you can take the time to sit down and find ways you can save some extra money, then you’ll feel a lot more equipped to take on the tough times ahead. Sometimes it’s hard to find this time when life is busy—but it’s worth it in the long run.
However you’re feeling about the upcoming cost of living increases, try not to bottle it up inside. Finances can sometimes be a taboo topic but don't suffer in silence. It’s tempting to put off debts and financial issues at times. But eventually, these feelings and problems can bubble to the surface, and in the long run, this is often worse. Talk to others you trust about how you’re feeling. These conversations can help you gain perspective and release any heavy emotions you might have.
The Government have released several measures to support the cost of living increases this year. This includes the Government scheme offering a £150 council tax rebate to help with the rising energy prices. But there are further government support measures in place to support those who need it.
We have a fantastic finance team on hand to answer any and all questions you might have. Get in touch with us via the 24/7 helpline today if you need support.
If you're an employer looking to support your employees through the cost of living crisis, we can help you provide industry-leading employee support. Just call one of our wellbeing experts on:
UK: 0844 892 2493
ROI: 01 886 0324
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