Preserving the value of savings Till as late as 10 years ago, we had a fairly long period high inflation and interest rates; many persons planned their savings for old age, assuming that these rates would continue for long. The drop in rates after 1998 led to decline in returns for the retired who were dependent on interest income.
Employers providing defined benefit schemes found that the extent of unfunded portion of the liability was increasing. Not all persons realised that they needed to save at rates higher than the inflation rate; inflation could erode the value of their savings and that health care and typical old age expenses could eat into their capital.