Inflation still highest for oldest pensioners due to energy prices, but lowest for the younger, more active retired

17th December 2013

The over 75s have suffered the highest rate of inflation for the whole of 2013 with the rate for November coming in at 2.2% according to Alliance Trust monthly study of inflation rates.

This group have suffered more because they  spend a larger share of their budgets on basic goods such as gas and electricity.

Yet the more active 65 to 74 year olds face the lowest rate of inflation, at just 1.6%, thanks to lower inflation in food, petrol and package holidays.

This month’s official inflation report shows that the headline rate of inflation fell from 2.2% to 2.1%. Alliance Trust’s monthly study of inflation rates affecting different age groups found that four out of five age groups saw their inflation rate fall over the month. However, it is still the over 75s who face the highest rate of inflation, at 2.2%, despite a fall from 2.5%.

This age group has been hit the hardest because it spends a larger share of its budget on household energy. Gas price inflation is running at 6.3% and electricity inflation at 6.7%. Gas and electricity price inflation eased in November, despite the much publicised price hikes and this is because prices were also increased in November 2012 thus affecting the year on year rate of growth.

It is now the 65 to 74 year olds who are experiencing the lowest rate of inflation, at 1.6%, the lowest level for this age group since September 2009. The fall in November was due to a combination of lower inflation in food, petrol and package holidays. For example, food price inflation fell from 4.3% to 3% in November and this is an area of relatively large expenditure for this age group.

The youngest age group, the under 30s, saw no change in their inflation rate last month, at 2.1%. This group, once again, has the second highest rate of inflation. The main contributor is still education costs with the inflation rate for this category unchanged at 10.3%. Due to the hike in tuition fees this will remain the case until next autumn, keeping the inflation rate of this age group elevated in comparison with some of the other age groups.

Linsey Thomson, Alliance Trust Senior Economic Analyst, says: “Although the over 75s still suffer the highest rate of inflation, at 2.2%, we were encouraged by the fact that their rate of inflation slowed over the month. Gas and electricity price inflation eased but remains elevated and the problem is that these rates of inflation will remain in place for a year, and this will weigh on household budgets, particularly those of the elderly. In contrast, the 65 to 74 year olds face the lowest rate of inflation, at 1.6%, as they are benefiting most from the current combination of lower inflation for food, petrol and package holidays.

“Our research highlights that it is difficult to apply a general rate of inflation to all age groups. Although we saw an easing in gas and electricity price inflation, it is worth remembering that utility price inflation has been positive for over a year now and will remain high through most of 2014, barring an unexpected price cut. Rising costs in these essential areas, at a time of low growth in average earnings, is putting pressure on all household budgets as it leaves everyone with less money to spend in more discretionary areas”.

Age Group Inflation Rate
Under 30 2.1%
30-49 Year Olds 1.8%
50-64 Year Olds 1.7%
65-74 Year Olds 1.6%
75 and Over 2.2%

 

Spending Weights

Age Group Food Electricity Gas Petrol Clothing/ Footwear
Under 30 9.8% 2.3% 1.7% 5.0% 5.2%
30-49 Year Olds 11.3% 2.3% 2.1% 6.4% 5.8%
50-64 Year Olds 12.4% 2.5% 2.3% 6.7% 5.2%
65-74 Year Olds 14.2% 2.8% 3.2% 5.5% 4.8%
75 and Over 15.7% 3.7% 3.9% 3.4% 3.1%

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

Source: The Family Spending Survey: 2012 edition and In-house Analysis

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