Age UK has launched a ‘Silver RPI’ to highlight the way that rising prices are experienced by those aged over 55. It is around 2% higher than headline RPI. For those aged over 75, it is nearly 4% higher than the standard measure.
The charity intends to publish quarterly updates.
Rising prices and inflation
The rate of inflation is normally expressed in terms of RPI (the retail prices index) or CPI (the consumer prices index). Both measures are used by government and based on how prices for a notional basket of goods have changed month by month or year on year.
RPI was the main measure until recently, but has been replaced by CPI as the government’s preferred yardstick. The key difference between the two is that RPI includes housing costs (specifically mortgage interest repayments), while CPI excludes these.
The Silver RPI is based on the same price data as RPI but allocates different weighting to specific items, depending on how significant these are for those aged 55 and above. Mortgage interest becomes increasingly irrelevant for older consumers, for example, while basics, such as heating and food take up a larger proportion of their household income. Age UK reflects changing consumption patterns by calculating a separate index for five different groups: 55-59, 60-64, 65-69, 70-74 and 75+. Silver RPI tends to rise with age.
Understanding inflation later in life
Launching the new inflation measure, Gordon Morris, Managing Director of Age UK Enterprises, said:
‘At the heart of our organisation is the understanding that those in later life face different financial pressures to the general population. For too long, existing measures of cost change have failed to adequately capture this by treating those in later life as one homogenous group with identical behaviours who experience money (and inflation) in the same way.’
‘We commissioned the Silver RPI to address this and, in the process, better understand how finances change in later life.’
One key indication from the Silver RPI is how those aged 55 and above have experienced a more rapid rise in prices than younger consumers over the past two years. This is caused in part by specific items increasing in price but also by falling mortgage interest rates, which have added to younger consumers’ spending power but done little for those who no longer have a mortgage.
Falling interest rates have had a negative impact on those with savings rather than borrowings. Lower returns and rising prices make it more important than ever for this group to shop around for the best deals and make their money go further. By checking their phone tariffs, energy bills and insurance policies, they can avoid paying over the odds.
They can also keep a close eye on the interest paid by savings accounts and cash Isas. Top rates have fallen considerably over the last four years, but there are still some accounts that pay better rates than others. Recent Which? research found some accounts paying just 0.01%, while others gave nearly 3% interest. Our new savings booster can help you find the best deals.
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