Cost of living rising nearly a third faster for UK’s elderly

The rate of inflation facing the over-75s has declined over the month, from 3.4% to 3.1%, but remains higher than the inflation rates facing other age groups, according to Alliance Trust.

Households headed by someone aged over 75 have consistently faced inflation of more than 3% since May 2006. Despite the official rate of headline inflation falling back to 2.4% in June, Alliance Trust’s monthly inflation alert shows that the inflation rate facing the over-75s is still 29% higher.

The headline findings, based on the updated spending patterns of different age groups and analysis of official June inflation figures are:

The inflation rates facing all age groups have declined for a third consecutive month as gas and electricity prices fell sharply. Gas prices fell almost 3% over the month and electricity prices declined by over 1%

Inflation for the over 75s remains high at 3.1%, that's 29% higher than headline inflation of 2.4%

The youngest age group continue to face the second highest rate of inflation as they still face the burden of higher rents and education costs

Alliance Trust maintains call for pensions to be linked to rise in retired cost of living

Inflation and Age (Jan 2004 to June 2007)

Alliance Trust's age-related inflation study has been updated using official price data for June. Our results show that the rate of inflation facing every identified age group continued to decline, as electricity and gas prices decreased. However, the impact of inflation continues to differ for different age groups. The rate of inflation facing the over 75s remains the highest, at 3.1%, as they allocate a high proportion of spending on basic necessities. Energy price cuts are now being passed through to consumers, with gas price inflation running at 5% and electricity price inflation at 6%. Over the month, this contributed to the lower inflation rates faced by every age group. Elderly households have been facing a rate of inflation in excess of 3% since May 2006, missing out on lower prices for clothing and audio-visual products.

The under 30s still have the second highest rate of inflation, despite falling from 2.8% to 2.7%. Young people spend a large proportion of their budgets on basic goods and services, such as gas, electricity and food, which although eased over the month still remain high. In addition, they face the burden of higher rents and education costs, which have increased by 14% over the last year.

Shona Dobbie, Head of the Alliance Trust Research Centre said, "Our four-year study continues to highlight the extent to which the UK's elderly are the group hit hardest by current high levels of inflation. Headline inflation has fallen back to 2.4% this month, but the elderly are still facing a higher rate of inflation of 3.1%. Any household that spends a large proportion of its budget on basic goods and services is currently facing a higher rate of inflation than the headline inflation figure suggests. Falling gas and electricity prices are helping, but gas price inflation is still running at 5% and electricity price inflation at 6%, which adds to the cost of running a home. Gas and electricity prices have not yet fallen far enough to bring elderly inflation in line with the official rate. Food price inflation remains high at 4.8% as meat, fish and vegetable prices all increased over the month”.

"The impact of higher prices for basic goods and services, such as heating and food, almost always falls most heavily on the elderly and those on low incomes, as these households spend a larger proportion of their budgets on these necessities. In recent years, low income and elderly households have been forced to allocate a large part of their budgets to the goods and services which have experienced the highest price changes, leaving little disposable income left over to spend on discretionary goods, such as clothing, footwear and audio visual products, where prices have declined over the last 12 months."