22 March 2016, 00:00
22 March 2016, 00:00
Saga releases its latest inflation report for over 50s
Saga's latest inflation report shows that annual Consumer Price (CPI) inflation stood at 0.3% in February, unchanged from the previous month. Inflation therefore remains substantially below the Bank of England’s central target of 2.0%.
- The largest downward contribution to inflation came from the transport sector, from price changes for items such as road passenger transport, second-hand cars and bicycles. Rising food prices, particularly for vegetables, offset this. However, despite a month-on-month rise, food prices were still 2.3% lower than a year ago.
- In line with the headline rate, annual inflation on the Retail Price Index (RPI) also remained unchanged, standing at 1.3%.
- 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 February 2016 (January 2016 figures in brackets):
- 50-64: 0.0% (0.0%)
- 65-74: -0.2% (-0.2%)
- 75 and over: 0.0% (0.0%)
- We calculate that annual retail price index (RPI) inflation was as follows for the over 50s age bands in February 2016 (January 2016 figures in brackets):
- 50-64: 0.6% (0.5%)
- 65-74: 0.5% (0.5%)
- 75 and over: 0.3% (0.3%)
- On CPI-based measures of inflation, the over 50s age group continues to experience either ‘noflation’ or deflation across their typical basket of goods and services. The difference is largely due to the lower prices of essential items. The prices of food, motor fuels and utilities all remain lower than they were a year ago – something that is particularly beneficial to the most vulnerable pensioners (for whom expenditure on these items constitutes a more significant share of total spending).
- Between September 2007 - when the financial crisis started to really get underway - and February 2016, the cost of living for those aged 50-64 has been broadly in line with the UK average, on RPI-based measures of inflation which include mortgage interest payments. The cost of living has risen by more than the UK average for the over 65s – this group for the most part did not benefit from lower interest rates and mortgage interest payments. Over 65s were also impacted by relatively high levels of food and utility price inflation prior to the UK entering a period of ‘noflation’. Compared with September 2007, living costs have risen for different age bands as follows:
- 50-64: 25.0%
- 65-74: 27.8%
- 75 and over: 28.2%
- Whole population (RPI): 25.0%
Overall, today’s inflation data are good news for the over 50s. Lower prices for essentials leave more money to be spent on discretionary purchases such as holidays and restaurant visits. Even discretionary items are seeing quite modest rises in prices at present. Restaurant & hotel costs are 1.9% higher than a year ago on the latest data, while prices for recreational & cultural activities are 0.1% lower.