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Inflation cuts spending power of £1m

It's no longer enough for a lavish lifestyle

A millionaire living in 1907 Britain would now need at least £85.6 million to fund an equally lavish lifestyle, a new report revealed today.

Research by Clerical Medical looked into the effect of inflation on the spending power of £1 million over the past 100 years.

It found that in pre-First World War Britain, a net worth of £11,700 would have been enough to live the life of today’s millionaire.

Looking over the past 50 years, an individual sitting on a fortune of £17.2 million today would have the same spending power as a millionaire in 1957.

Spending punch halved

Over the last two decades, inflation has halved the spending punch of the pound, with someone today needing £2 million to fund the yuppie lifestyle of a mid-1980s millionaire.

Clerical Medical said that even the relatively low inflation of the past 10 years has had a marked effect on the value of money, with £1.3 million providing the same bang in the buck as £1 million in 1997.

Looking forward, compilers of the report predicted that the value of £1 million would be cut by nearly two-thirds over the next 50 years even if inflation rose in line with the government’s target of 2 per cent a year.

Lavish lifestyle

Rob Devey, managing director of Clerical Medical, said: “There is no doubt that £1 million is still a lot of money although inflation has substantially eroded its purchasing power over the past 100 years.

“The value of £1 million will be reduced significantly further over the next 50 years, even if inflation is kept firmly under control.

“Whilst £1 million is no longer enough to fund a lavish lifestyle, it can still go a long way with careful financial planning.”

The Press Association, All Rights Reserved

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