With today’s announcement that inflation has remained at 2.7% and signs that high inflation is here to stay, Brits collectively will need to find an extra £17.7 bn, according to retirement income specialists MGM Advantage

Aston Goodey, distribution and marketing director at MGM Advantage said: “Households are already at financial breaking point, but with inflation remaining stubbornly at 2.7% for four months in a row, people will continue to feel the strain from rising costs.

“The hidden cost of inflation can have a devastating impact on retirees’ incomes, which are typically fixed. More than 90% of people purchase level incomes when they retire, which means their real spending power over time is reduced even if inflation is only growing slowly.

“Over a typical 20 year retirement, people could easily see the real value of their income halve after inflation. This has created strong demand for retirement income solutions that can provide some protection against the rising cost of living.”

Meanwhile, savers are being encouraged to be more proactive and move to  accounts paying better rates in order to limit the impact of inflation on their money.

According to analysis by MoneySupermarket.com, to beat inflation, basic rate tax payers will need an account paying at least 3.39% to gain benefit in real terms from their savings, increasing to 4.51% for higher rate tax payers, and 5.41 % for 50% tax payers.

The price comparison website found that no easy access accounts currently beat the effects of inflation, while six easy access ISAs and one fixed rate ISA beat inflation.

Only 11 regular saver accounts beat inflation for basic rate taxpayers, while only five regular saver accounts beat inflation for higher rate taxpayers.

However, with the current average savings rate currently at 0.26%, the majority of savers can still switch to much better deals and reduce the impact of inflation.

Kevin Mountford, head of banking at MoneySupermarket.com, said: “With inflation remaining high, and set to remain so for the foreseeable future, people need to be prepared to limit the impact of the rising cost of living on their household budgets. For savers it is important to make sure your money is working as hard for you as it can do.

“Although there are only a few accounts which offer returns which beat the eroding effect of inflation, it is vital not to be disheartened. The important thing is that people are prepared to switch if they are not currently on the most competitive deal, even if the rates on offer don’t beat the eroding effect of inflation – especially as the majority of savings are sitting in accounts paying a derisory rate of interest. If you are a UK taxpayer, then using your tax free ISA allowance should be the first port of call for savers looking to limit the impact of inflation.

“It is also important to check your rate if you signed up to an account offering a bonus rate, as there are many deals coming to an end shortly, meaning you could be left on a very uncompetitive rate. Savers may also consider looking at alternative products such as offsetting savings against mortgage borrowing or peer-to-peer lending as the returns may be more favourable.”