Inflation down for over 50s but the long term picture is less rosyTuesday 19 August 2014
Paul Green, director of communications for Saga said "Over 50s will be breathing a sigh of relief with today's inflation figures but it may be short lived. Food prices are currently falling, which is particularly beneficial for the most vulnerable pensioners and those on low incomes who spend a greater proportion of their income on food and non-alcoholic beverages.
Inflation down for over 50s but the long term picture is less rosy
"However, the longer term picture is significantly less rosy. In fact, the cost of living has risen substantially more for the over-50s than for the overall population on the broad-based RPI measure of prices, but their incomes have often failed to keep pace, leaving them increasingly having to make difficult decisions about their priorities."
Key points from the report:
- Consumer Price Index (CPI) annual inflation was 1.6% in July, down from 1.9% in June.
- Retail Price Index (RPI) annual inflation stood at 2.5% in July, down from 2.6% in June.
- Falls in clothing prices provided the largest contribution to the fall in the rate. Other large downward effects came from the alcohol, financial services and food & non-alcoholic drinks product groups.
- Given that expenditure patterns vary across households, experienced inflation rates will differ across age-bands. We calculate that annual consumer price index (CPI) inflation was as follows for the over 50s age bands in July 2014 (June 2014 figures in brackets):
- 50-64: 1.5% (1.8%)
- 65-74: 1.3% (1.6%)
- 75 and over: 1.5% (1.9%)
- We calculate that annual retail price index (RPI) inflation was as follows for the over 50s age bands in July 2014 (June 2014 figures in brackets):
- 50-64: 1.9% (2.0%)
- 65-74: 2.0% (2.1%)
- 75 and over: 1.9% (2.1%)
- Figures 1 and 2 illustrate the annual rates of inflation for the over-50s. Inflation is currently slightly lower for the over 50s than other age groups due to some easing in essential item inflation. In particular, food prices are currently falling on a year-on-year basis – something which is particularly beneficial to the most vulnerable pensioners (for whom expenditure on food constitutes a significant share of total spending).
- However, over a longer time frame, the over 50s have seen a greater increase in living costs. Between September 2007 - when the financial crisis started to really get underway - and July 2014, the cost of living has risen substantially more for the over-50s than for the overall population on the broad-based RPI measure of prices. While younger age groups benefitted greatly from falling mortgage interest payments as the Bank of England cut interest rates during the recession, older age groups – who had largely or entirely paid off their mortgages – in general failed to benefit from this. Further, the rising cost of essentials such as utilities placed pressure on the living standards of the over 50s. Compared with September 2007, living costs have risen for different age bands as follows:
- 50-64: 24.6%
- 65-74: 27.1%
- 75 and over: 27.9%
- Whole population (RPI): 23.1%
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