Saga inflation report for November shows inflation lower for over 50sWednesday 17 December 2014
Saga's latest inflation bulletin shows that inflation is now lower for over 50s. However energy costs are still higher than the same time last year, which will still have a significant impact for over 65s who spend a greater proportion of their outgoings on heating their home.
Saga inflation report for November shows inflation lower for over 50s
- Consumer Price Index (CPI) annual inflation was 1.0% in November, down from 1.3% in October and the lowest annual percentage change in over 12 years.
- Retail Price Index (RPI) annual inflation stood at 2.0% in November, down from 2.3% October.
- The largest downward contributions to the change in CPI inflation this month came from the costs of transport and recreation and culture. Average petrol prices fell a further 3p per litre between October and November.
- The fall in motor fuels is particularly beneficial to the 50-64 age group, for whom spending on motoring typically forms a greater share of their total expenditure compared with other age groups.
- Fierce price competition between supermarket chains appears to have helped lower the cost of the Christmas holidays this year. The prices for both food and alcoholic beverages have fallen over the last 12 months and respectively stood 1.7% and 1.1% lower this November.
- Given that expenditure patterns vary across households, experienced inflation rates will differ between age bands. We calculate that annual consumer price index (CPI) inflation was as follows for the over 50s age bands in November 2014 (October 2014 figures in brackets):
- 50-64: 0.7% (1.1%)
- 65-74: 0.5% (0.9%)
- 75 and over: 0.9% (1.2%)
- We calculate that annual retail price index (RPI) inflation was as follows for the over 50s age bands in November 2014 (October 2014 figures in brackets):
- 50-64: 1.1% (1.5%)
- 65-74: 1.2% (1.5%)
- 75 and over: 1.2% (1.5%)
- Figures 1 and 2 illustrate the annual rates of inflation for the over-50s. Inflation is currently lower for the over 50s than other age groups due to the continued 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 November 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. However, it seems that this trend has reversed, helping close the gap between the age groups. Compared with September 2007, living costs have risen for different age bands as follows:
- 50-64: 24.6%
- 65-74: 27.3%
- 75 and over: 28.6%
- Whole population (RPI): 23.6%
- Looking to next month’s figures, inflation is likely to remain subdued. Energy bills, which rose significantly in December last year are unlikely to rise to the same extent this year; several supplier have already committed to keeping prices frozen into 2015. This should help to ease inflationary pressure on the over 65 age group in particular, who proportionally spend considerably more of their income on these items.
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