17 June 2008

LATEST FIGURES SHOW SHARP INCREASE IN BASIC COSTS IS PUMMELLING PENSIONERS

· The inflation rate facing the over 75 year olds surged to 4.8% in May. This rate is 45% higher than the official rate of inflation of 3.3%.

· For the first time in our six-year study, 50-64 year olds and 65-74 year olds now also face inflation rates of more than 4%.

· Food prices have risen by almost 9% over the last year, electricity prices have jumped by almost 10%, and petrol prices are up almost 20%.

· Alliance Trust Research Centre warns that rising prices for basic goods could push inflation even higher over the next few months, forcing the authorities to leave interest rates higher for longer.

Alliance Trust’s independent study of age related inflation has found that the surge in inflation during May continued to hit the over 75 year olds the hardest – this age group saw their inflation rate increase from 4.1% to 4.8% during the month. The inflation rates facing all other identified age groups have also increased and the majority are running ahead of the official headline rate of inflation of 3.3%.

Age Group	Inflation Rate
Under 30	3.3%
30-49 Year Olds	3.7%
50-64 Year Olds	4.1%
65-74 Year Olds	4.3%
75 and Over	4.8%

Basic costs continue to rise sharply. Food price inflation has increased by almost 9% over the last year, utility prices have increased by over 11% and petrol prices have risen by almost 20% in the same period. These price increases have a major impact on the inflation rate facing the elderly as a significant proportion of their household income is spent on basic goods and services. In contrast, younger generations spend a higher proportion of their incomes on clothing, footwear and audio-visual goods, where prices are continuing to fall, helping them to escape the worst of the current inflationary pressures.

These findings confirm the elevated level of inflation facing the older age groups is worsening, driven by high price increases for food, fuel and utilities. Alliance Trust Research Centre predicts that inflationary pressures will remain strong in the coming months for basic goods and services.

Shona Dobbie, Head of the Alliance Trust Research Centre said, "Our study continues to highlight the extent to which inflationary pressures are hitting the elderly hardest. This is because the over 75s are the most exposed to the negative impact of high food and utility prices. Food prices are now rising at a general rate of 9%, but in the case of some basic food groups, such as dairy products, inflation is running as high as 17%. This affects the elderly in particular, as these households spend a higher proportion of their budgets on the more basic food items. Utility prices are also on the rise again, with gas price inflation currently running at 7% and electricity price inflation running at almost 10%. Petrol price inflation, at almost 20%, is hitting everyone hard.

“For the economy, the problem is high inflationary pressures throughout the whole supply chain, but for the consumer the problem centres in particular around the basic goods and services, as these are displaying the sharpest price increases. This leaves us all with less money to spend on the items where prices continue to fall. Unfortunately, we expect little respite from this situation over the next couple of months as the oil price is expected to remain high and there are global shortages of some foodstuffs. Headline inflation is likely to rise a bit further in the short term. The danger is that this high level of inflation forces policy makers to leave interest rates higher for longer, increasing the risk of an even greater slowdown in demand and threatening the economy as a whole”

Alliance Trust’s full latest report on ‘Inflation and Age’ is available on www.alliancetrust.co.uk

You can obtain a copy of the report by emailing contact@alliancetrust.co.uk or phoning 08000 326323.

Contacts

Jane Holligan, Media Relations Manager Anna Schirmer/ Stuart Lerman/ Anna Moulds

Alliance Trust Lansons Communications

Tel +44 (0)1382 306064 Tel +44 (0)20 7490 8828

Mobile 07745 783212 Email alliancetrust@lansons.com

Email jane.holligan@alliancetrust.co.uk

Web www.alliancetrust.co.uk

Notes to editors

1. Alliance Trust is an international investment and financial services group. It is headed by Alliance Trust PLC, a FTSE 100 company and the largest generalist investment trust company listed on the London Stock Exchange. Through its subsidiaries, Alliance Trust offers investment dealing, self-invested personal pensions and a choice of investment wrappers.

2. The Research Centre is part of Alliance Trust and was formed to carry out economic and social analysis to deepen our understanding of economies, markets and socio-economic issues.

3. Photographs of Shona Dobbie are available.

4. Inflation and Age chart illustrated below.

Inflation and Age (Jan 2006 to May 2008)