Inflation is important because over time it reduces the buying power of your savings. For example, in the 25 years since 1983 inflation has increased by 143%*. In other words, £243 invested in 1983 today would only be worth £100 in real terms. Because most people invest for a number of years, it’s important their savings grow by at least the annual rate of inflation, otherwise they will be worse off in real terms.

* See the 'This is money' website at : www.thisismoney.co.uk/tools-and-calculators/calculators/index.html?in_page_id=86