More than two-fifths (42%) of people predict their finances will worsen over the next three months, according to a wealth and wellbeing tracker.
LV= said the findings are the most downbeat since June 2020, when its quarterly survey started.
A similar proportion (44%) of the 4,000 people surveyed across the UK in March said their finances had already deteriorated over the previous three months.
More than half (58%) of people said their total monthly outgoings have increased in the past few months and 23% are now saving less.
Pensioners were found to be particularly likely to say their spending has increased.
Nearly two-thirds (65%) of retirees said their supermarket spend has increased in the past three months and 46% expect their finances to worsen over next three months.
The state pension and some other benefits are uprated by 3.1% in April, but inflation could hit a 40-year high of 8.7% in the fourth quarter of 2022, according to the Office for Budget Responsibility (OBR).
Clive Bolton, managing director of protection, savings and retirement at LV= said: “The results of the latest LV= wealth and wellbeing monitor highlight how the finances of millions of people are being squeezed by the large rise in the cost of living.
“The indices for savings, financial outlook and outgoings are the worst recorded since we started surveying consumers two years ago.
“Consumer sentiment had been steadily improving between spring and early autumn 2021 as the success of the vaccine programme, fall in death rates and easing of lockdown restrictions allowed life to begin to return to normal.
“However, the sharp rise in the cost of living has caused confidence to fall dramatically.
“Rising energy prices are becoming a significant problem for many people, particularly those who are retired.
“Rising prices coupled with poor returns on deposit accounts will dismay pensioners whose only or main source of retirement income is the state pension.
“Rising inflation and poor returns from cash present a dilemma for people in retirement.
“They might have to drawdown their savings more quickly than they would want or switch some of their savings into higher-risk assets.
“These can offer the prospect of keeping pace with inflation but can be hit hard if investment markets fall.
“As always with retirement planning, consulting a financial adviser about your retirement plans is a good way to understand your retirement options, and how you might ensure your retirement income keeps pace with inflation.”
Published: by Radio NewsHub