Long term inflation still much higher for Saga GenerationsTuesday 16 September 2014
New inflation figures show CPI is down to 1.5% from 1.6% the previous month, which is good news for consumers but masks the disproportionate long term impact inflation is having on the Saga Generations.
Long term inflation still much higher for Saga Generations
Saga Inflation Report – August 2014 bulletin
Saga’s Paul Green comments on today’s inflation figures: “Thanks to reductions in the costs of food and non-alcoholic drinks inflation for older consumers over this period has slowed and is more in line with other age groups. However, looking at a one month window doesn’t give the full picture.
“In reality, over the longer term the pain of inflation has been felt most harshly by older consumers who have experienced a much higher cost of living than the population as a whole. Whilst RPI for the population as a whole since 2007 was 23.7%, the rate experienced by those aged 65-74 was significantly higher at 27.3% and a staggering 28.3% for those aged over 75. Whilst many of us continue enjoy the balmy temperatures that an extended summer is offering, many older older consumers will already be thinking about the onset of colder weather, and the ‘eat or heat’ decisions they are likely to be faced with.”
- Consumer Price Index (CPI) annual inflation was 1.5% in August, down from 1.6% in July.
- Retail Price Index (RPI) annual inflation stood at 2.4% in August, down from 2.5% in July.
- Falls in the prices of motor fuels and food & non-alcoholic drinks provided the largest downward contributions to the change in the rate. The largest, partially offsetting, upward effects came from the costs of clothing and alcohol & tobacco.
- 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 August 2014 (July 2014 figures in brackets):
- 50-64: 1.4% (1.5%)
- 65-74: 1.2% (1.3%)
- 75 and over: 1.4% (1.5%)
- We calculate that annual retail price index (RPI) inflation was as follows for the over 50s age bands in August 2014 (July 2014 figures in brackets):
- 50-64: 1.7% (1.9%)
- 65-74: 1.7% (2.0%)
- 75 and over: 1.7% (1.9%)
- 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 August 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: 24.9%
- 65-74: 27.3%
- 75 and over: 28.3%
- Whole population (RPI): 23.6%
Full data and graphs available here
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