Elderly still face inflation of more than 5%

This month's official inflation report has shown a small decline in headline inflation to a rate of 3.0%, but Alliance Trust's ongoing monthly study of age related inflation reveals that the over 75 year olds face an inflation rate which is far higher than the official rate, at 5.4%. Once again, the elderly saw the smallest decline in inflation among all five age groups, leaving them facing a rate of inflation of 5.4%, which is 80% higher than the headline rate and almost double the inflation rates facing the under 30s and 30-49 year olds.

Gas prices have increased by 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 more than 7% of their budget on electricity and gas bills whereas the under 30 households spend just over 3% on such utilities.

Over 75 year olds also suffer when food prices are high. Food price inflation remains a problem with prices still more than 11% higher than a year ago. This hits the over 75 year old age group the most acutely as they allocate more than 16% of their household budget to food compared to 9% for the under 30 households. Inflation for many basic food items is even higher. During January, price inflation in vegetables reached 16% and meat prices are more than 14% higher than a year ago.

In contrast, the under 30s and 30- 49 year olds are currently facing inflation rates which are lower than the official rate of inflation. These younger age groups are benefitting 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 sharply. Over the last year, the prices of audio-visual goods have fallen by almost 15% and clothing prices have dropped by more than 11%, reflecting both post-Christmas discounting by the major retailers and the government's recent cut in VAT. The under 30s spend almost 6% of their budget on clothing and footwear compared to 4% allocated by the over 75 year olds.

Shona Dobbie, Head of the Alliance Trust Research Centre said, "Although we saw a small decline in the headline rate of inflation this month, we are concerned that inflation facing the older age groups remains high. The elderly are not seeing the same benefits of falling prices as the young. The rate of inflation facing the over 75s has been reduced to 5.4 %, but this is 80% higher than the official rate of inflation of 3.0%. This confirms that the elderly continue to be hit hardest, even now that inflation is in retreat. This is because they spend a higher proportion of their budget on utility costs and food, and we have yet to see any significant fall in gas or electricity prices. This high level of inflation facing the elderly is particularly worrying during these cold winter months as the need to pay elevated gas, electricity and food prices leaves elderly households with much less money to spend elsewhere."

"Younger age groups are benefiting most from the current downturn in inflation, as they spend relatively more on audio visual products, and clothing and footwear, where prices are falling quickly. Retailers continued to discount prices in January and the younger age groups benefitted most from this move. The current gap between the inflation rates facing the young and elderly remains wide and is of great concern at a time when older people who rely on income from savings may also be suffering from the effects of falling interest rates."