Money News

Inflation up again - over-50s and savers feel the squeeze

By Martin Fagan - news@consumerchoices.co.uk

Although inflation is 4.4%, over 50s struggle with 20% inflation and savers see spending power eroded.

The latest inflation figures show the rate of Consumer Prices Index (CPI) inflation rose to 4.4% from 4.2% in June, according to figures from the Office for National Statistics (ONS).

The Retail Prices Index (RPI) measure, which includes housing costs such as mortgage repayments and council tax, was unchanged at 5%.

But clothing and footwear prices - measured by the CPI - saw their biggest annual increase since records began in 1997.

Although rising inflation affects all sectors of society and age groups, when coupled with falling stock markets and historically low interest rates, it particularly hits those over 50, who are burdened with a higher rate of inflation than younger generations, according to insurance firm Saga.

This is because the over-50s spend a larger proportion of their income on items such as food and fuel, commodities that have seen huge price rises recently.

Also, as people over 50 are sometimes compelled to live on income generated by savings, historically low interest rates mean the spending power of this income has collapsed.

Saga said that inflation for older age groups is up nearly 20% cumulative, wiping out nearly a fifth of the purchasing power of older people.

"The Saga Price Indices reveal that older people in their 50s are worse hit by rising inflation than the rest of the country,” said Ros Altmann, director general of the Saga Group.

“They are supporting a huge burden, many with elderly relatives to support as well as their children and grandchildren. The government must take note of the pressures the baby boomers are suffering. Anyone on fixed incomes will really be in trouble.”

As well as the over-50s, the increase in inflation has hit savers of every age. To beat inflation, a basic rate taxpayer at 20% needs to find a savings account paying 5.50% per annum, according to Moneyfacts, while a higher rate taxpayer at 40% needs to find an account paying at least 7.33%.