The Daily Insider: Inflation monster threatens to head back towards double digits

Over the weekend, I had occasion to investigate a family member’s investments. It delivered an insight into the practical impact of inflation – and a warning as the dreaded monster threatens to head back towards double digits.

Millions of South Africans rely on fixed income generated through the purchase of an annuity at retirement. In the one I looked at, a R25k lump sum annuity bought in 1995, had paid its owner R320 a month – a seemingly handsome return of R96 000.

Excepting it wasn’t. The R25k of 1995 is identical to R100 000 in 2021 money. Worse, the R320 received today only buys what R80 got you 26 years ago. The scariest part is inflation averaged just 5.5% between 1995 and 2021. Even the wildest optimists won’t predict that being repeated in the next 26 years.

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