Earnings: Pay rises are already much lower than in previous decades, particularly the 1970s and 80s. But these decades were characterised by high inflation, and pay rises were high to match or keep ahead of inflation. So don't look at your 3 per cent pay rise as a joke - it may not feel like much but it is still keeping you ahead of inflation, and that is the important point to check.
Savings: Low interest rates go hand-in-hand with low inflation. If you can get 4 or 5 per cent on your cash you are doing pretty well. With inflation at 2 per cent, you are in fact doing better than when National Savings accounts paid 15 per cent at the end of the 1970s. Inflation then was raging at 18 per cent, so you were actually losing money when you stripped out inflation. Now, you are getting a 'real' return after inflation of 2 or 3 per cent. That's good - enjoy it while it lasts.
Endowments: You cannot expect to see such good returns from endowments in the future as they give now, or have given in the past. Several million people have already been told that their endowments may not pay off their mortgages. This is because endowments are now expected to grow at a slower rate than they were when first taken out. If you have been told this, you can either put extra money aside in a savings account or an Isa, or convert part of your mortgage to a repayment basis.
Investment: Returns on other types of investment are also expected to be lower. If you see products that offer double-digit returns, beware - they are likely to be riskier than you might think. The only way to increase your potential return is to take a bigger risk.
Pensions: Like other investments, our pensions will grow more slowly in future, so we need to pay more in, or keep working and paying in for longer, if we want to retire on a decent pension.
Mortgages: Low mortgage rates make mortgages look more affordable. But it is only the interest that is affordable - the actual debt becomes a bigger burden because high inflation is not cutting its value any more. So don't take out a bigger loan than you can easily afford to pay back, and make paying off your mortgage a priority - it is one of the best investments you can make.
