Saga research shows inflation is higher for people over 50 than for rest of the nation
Older people are the silent sufferers of current economic turmoil. Compared with four years ago, the cost of living has risen for different age bands as follows:
- 50-64: 17.7%
- 65-74: 19.1%
- 75 and over: 19.0%
- Whole population (RPI): 13.9%
With spending patterns varying across households, inflation rates naturally differ across age groups, Saga therefore created the Saga Price Index* to focus on people over 50 which discovered that inflation on both the RPI and CPI measures are as high or higher for over 50s compared with the UK as a whole.
Annual consumer price index (CPI) inflation was 4.5% in August 2011 up from 4.4% in July, breakdown for the over 50s in August was as follows:
- 50-64: 4.7% (4.7% in July)
- 65-74: 4.5% (up from 4.4% in July)
- 75 and over: 4.5% (up from 4.4% in July)
Annual retail price index (RPI) inflation was 5.2% in August, up from 5.0% in July. Saga calculated that annual retail price index (RPI) for the over 50s:
- 50-64: 5.8% (up from 5.7% in July)
- 65-74: 5.5% (up from 5.3% in July)
- 75 and over: 5.3% (up from 5.0% in July)
Commenting on The Saga Price Indices, Dr Ros Altmann, Director-General, Saga said: “The over 50s are being ignored in policy terms. Their savings have been shot to pieces and they are being burdened by soaring inflation.
“Older people are trapped. They cannot spend with living costs rocketing through the roof and they’re often stuck with rising unemployment and low interest rates battering their hard earned savings.
Are they expected just to sit, wait and suffer?”
Saga say Government is ignoring the plight of older people. As prices soar, this group of people, many of whom are often on a fixed income, are rapidly getting poorer and poorer.
Saga believes there are options available to the Government to help improve the over 50s’ position in the face of this double whammy of low rates and high inflation. For example by providing higher ISA limits for older people. This would be the equivalent of the Bank of England raising interest rates by up to 3%**. This is not a new idea, and has indeed been done before and Saga believes it would provide some much needed respite for many older people grappling with the rising cost of living.
“We need some alternatives for this important group. It is older consumers who have the power to open up jobs for the young by spending more. But until they are able to spend again or feel that their savings are safely protected, we have reached a stalemate. It’s high time the Government took heed of our pensioners.”
Notes to editors:
*Saga has put this research together with economists from Centre for Economics and Business Research (Cebr)
**Example if Government introduced higher ISA limit:
Take an example of a typical ISA savings account paying 3.9 per cent: for a 40 per cent taxpayer having the tax free ISA status would be the equivalent of a taxable account paying 6.5 per cent* - so this would be similar to an increase in interest rates of 2.6%. To a 20 per cent taxpayer, a 3.9 per cent ISA interest rates would give the same net income as a taxable account paying just under 4.9 per cent**. So having the tax free ISA limit increased would be the equivalent of boosting the return on a taxable savings account by 1% to 2.6%.
||Interest rate net of tax
||Equivalent increase in interest rate |
|ISA account interest rate - tax free:
|Equivalent taxable account for 20 per cent taxpayer:
|Equivalent taxable account for 40 per cent taxpayer:
With this example, Saga illustrates that extending the ISA allowances would be like increasing interest rates for savers by between one and 2.6 per cent.