Despite drop in average inflation, elderly still face rate of 6.7%

As latest figures show a drop in average inflation, Alliance Trust's ongoing monthly study of age related inflation has found that the over 75 year olds continue to face an inflation rate that far exceeds the official rate. Despite headline inflation falling to 4.1% in November, this age group only saw their inflation rate decline from 7.1% to 6.7%. This was the smallest decline among all five age groups and leaves the elderly facing a rate of inflation which is 63% higher than the headline rate of 4.1%, which was down from 4.5% the previous month.

Gas prices increased more than 50% over the last year and electricity prices rose by more than 30%, hitting the over 75 year olds the hardest. This age group spends almost 7% of their budget on electricity and gas bills whereas the under 30 households spend just 3% on such utilities.

Over 75 year olds also suffer when food prices are high. Food price inflation accelerated in November and prices are almost 12% higher than a year ago. This hits the over 75 year old age group the most acutely as they allocate 16% of their household budget to food compared to less than 9% for the under 30 households. Inflation for many basic food items is even higher than this. In November, fruit and vegetable prices in particular rose strongly. Fruit prices increased almost 11% from a year ago and vegetable prices rose 14%.

The under 30s and 30- 49 year olds continue to face an inflation rate that is lower than the official rate of inflation. Younger generations benefit from the fact that they spend a higher proportion of their incomes on discretionary items, such as audio visual goods, clothing and footwear, where prices continue to fall. Over the last year, the prices of audio-visual goods have fallen by almost 14% and clothing prices have dropped by almost 8%, reflecting heavy discounting by the major retailers. The under 30s spend 6% of their budget on clothing, which is almost double the amount allocated by the over 75 year olds. The inflation rate facing these two age groups is 3.7% and is almost 10% lower than the official rate of inflation of 4.1%.

Shona Dobbie, Head of the Alliance Trust Research Centre said, "It is encouraging to see headline inflation fall back again this month, however, we remain concerned about the high level of inflation which the older age groups still face. The rate of inflation facing the over 75s has been reduced, but only to 6.7 %, which is still 63% higher than the official rate of inflation. This highlights the extent to which the elderly are suffering disproportionately as they spend a higher proportion of their budget on utility costs which have soared over the past year. This high level of inflation is worrying for elderly consumers especially now that we have entered the winter months as high gas, electricity and food prices leave elderly households with less money to spend elsewhere."

"Younger generations are benefiting from falling audio visual and clothing prices, which are pulling their inflation rates down. Huge sales by retailers mean that the younger age groups are likely to keep benefiting from such price cuts. This could cause the gap between inflation rates facing the young and elderly to widen."