20 January 2009

ELDERLY MISSING OUT ON FULL DROP IN INFLATION

  • Latest figures from Alliance Trust Research Centre show inflation rate facing over 75 year olds was 5.9% in December, 90% higher than the official rate of inflation of 3.1%
  • The gap between inflation rates facing young and old continues  to widen with the elderly facing an inflation rate more than twice as high as the younger age groups
  • Increases in gas and electricity prices and food price inflation hitting the elderly the hardest during the winter months
  • Both the under 30s and the 30-49 year age groups face inflation rates which are lower than the official rate of 3.1%.  These two age groups are benefitting the most from recent price falls and the cut in VAT.

 

Latest figures show another welcome decline in headline inflation but Alliance Trust’s ongoing monthly study of age related inflation reveals that the over 75 year olds continue to face an inflation rate which is 90% higher than the official rate. Despite headline inflation falling to 3.1% in December, the over 75s inflation rate remains far higher. The elderly saw the smallest decline among all five age groups, leaving them facing a rate of inflation of 5.9%, which is 90% higher than the headline rate and more than double the inflation rates facing the under 30s and 30-49 year olds.

 

Age Group

Inflation Rate

Under 30

2.7%

30-49 Year Olds

2.6%

50-64 Year Olds

3.2%

65-74 Year Olds

4.2%

75 and Over

5.9%

 

Gas prices increased more than 50% over the last year and electricity prices rose by more than 30%, hitting the over 75 year olds the hardest. This age group spends almost 7% of their budget on electricity and gas bills whereas the under 30 households spend just 3% on such utilities.

 

Over 75 year olds also suffer when food prices are high. Food price inflation remains a problem with prices still almost 12% higher than a year ago. This hits the over 75 year old age group the most acutely as they allocate 16% of their household budget to food compared to less than 9% for the under 30 households. Inflation for many basic food items is even higher. During December, meat and vegetable prices rose strongly and, as a result, price inflation in both categories is currently running at close to 15%.

 

In sharp contrast, the under 30s and 30- 49 year olds continue to face an inflation rate that is lower than the official rate of inflation. These younger age groups are benefitting from the fact that they spend a higher proportion of their incomes on discretionary items, such as audio visual goods, clothing and footwear, where prices continue to fall sharply. Over the last year, the prices of audio-visual goods have fallen by almost 14% and clothing prices have dropped by almost 12%, reflecting heavy pre-Christmas discounting by the major retailers and the government’s recent cut in VAT. The under 30s spend 6% of their budget on clothing, which is almost double the amount allocated by the over 75 year olds.

 

Spending Weights

 

Age Group

Food

Electricity

Gas

Petrol

Under 30

8.5%

1.6%

1.4%

4.2%

30-49 Year Olds

10.6%

1.8%

1.6%

5.1%

50-64 Year Olds

11.6%

2.0%

1.9%

5.1%

65-74 Year Olds

13.8%

2.5%

2.5%

4.5%

75 and Over

16.3%

3.4%

3.5%

2.5%

Note: This table shows the spending patterns of different age groups across different spending categories.

 

 

Shona Dobbie, Head of the Alliance Trust Research Centre said, "While it is clearly encouraging to see headline inflation fall back further this month, we remain concerned about the high level of inflation which the older age groups still face. The rate of inflation facing the over 75s has been reduced, but only to 5.9 %, which is 90% higher than the official rate of inflation. Even now that headline inflation is in retreat, the elderly continue to be hit as they spend a higher proportion of their budget on utility costs and food, both of which have soared over the past year. This relatively high level of inflation facing the elderly is particularly worrying during the cold winter months as high gas, electricity and food prices leave elderly households with less money to spend elsewhere.”

 

“Currently, the younger age groups are benefiting even more from rapid falls in audio visual and clothing prices, which are pulling their inflation rates down. Huge pre-Christmas sales by retailers mean that the younger age groups have benefitted even more this month. This is causing the gap between inflation rates facing the young and elderly to widen even further. It is a great concern to us to see that one group in society, arguably the most vulnerable, is currently suffering an inflation rate which is twice as high as that being faced by the younger age groups.”

 

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 / Anna Moulds

Alliance Trust                                                               Lansons Communications

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

Email  jane.holligan@alliancetrust.co.uk                    Email  alliancetrust@lansons.com

Web www.alliancetrust.co.uk

 

 

 

 

 

Notes to editors

 

  1. Alliance Trust PLC is a self-managed investment company with investment trust status. A FTSE-100 company, it is the largest generalist UK investment trust by assets listed on the London Stock Exchange.

 

  1. 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.

 

  1. Photographs of Shona Dobbie are available.

 

  1. Inflation and age chart is shown below.

 

 

Inflation and Age (January 2006 to December 2008)

Source: In-house