The latest official inflation figures show prices rising at a 5% rate, which is dreadful news for most people, but particularly for those living on fixed incomes, or saving up for retirement. Saga has asked the CEBR to calculate the inflation rate faced by older citizens and they show that older people face even higher inflation than the rest of society.
Even more worrying, since the start of the credit crisis, inflation for older age groups is up nearly 20% cumulatively. That means that nearly a fifth of the purchasing power of older people on fixed incomes has been wiped out - that is money they can never recover as they are out of the labour force. While price rises for the rest of the nation have been a cumulative 13.9% since 2007, for those aged 65-74 they are 18.8% and for age 75+ they have risen by 18.6%. We must not underestimate the impact of inflation over time.
Here are the figures:
With expenditure patterns varying across households, inflation rates naturally differ across age-bands, Saga therefore created the Saga Price Index* to focus on people over 50. Their analysis 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 4.4% in July 2011, breakdown for the over 50 in July was as follows:
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50-64: 4.7%
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65-74: 4.4%
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75 and over: 4.4%
Annual retail price index (RPI) inflation was 5.0% in July, unchanged from June. Saga calculated that annual retail price index (RPI) for the over 50s:
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50-64: 5.7%
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65-74: 5.3%
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75 and over: 5.0%
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 in general failed to benefit from this and The Saga Price Index shows that older generations have seen their cost of living rise substantially in the past four years with people over 75 witnessing a staggering increase of 18.6% compared to the UK average of 13.9% on the broad-based RPI measure of prices.
% increase in cost of living since July 2007:
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50-64:17.5%
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65-74:18.8%
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75 and over: 18.6%
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Whole population (RPI): 13.9%
Dr Ros Altmann:
"The Saga Price Indices reveal that older people in their fifties are worse hit by rising inflation than the rest of the country. They are supporting a huge burden, many with elderly relatives to support as well as their children and grandchildren. The Government must take note of the pressures the baby boomers are suffering. Anyone on fixed incomes will really be in trouble.
"And it is utterly shocking that elderly people have had to suffer inflation increases of over 18% in the past few years - these are people who are living of their savings with are eroding at a rapid rate."
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