A new statistic measures inflation as it applies to the silver-haired generation. No surprise, perhaps, that the Silver Retail Price Index (Silver RPI) shows that inflation has recently hit the over-54s harder than others. Housing costs form a smaller proportion of outgoings for older people, and so they have gained less from the reduction in mortgage costs that has occurred in the last few years. Age UK Enterprises commissioned Fathom Consulting to compile the Silver RPI.
Which? online notes that Fathom are “former Bank of England inflation specialists”. Which? explains that RPI (the standard or “headline” RPI, not the Silver one) was the main general measure of inflation until recently but has been replaced by the Consumer Price Index (CPI),which omits housing costs, as the government’s preferred yardstick. Fathom calculated the Silver RPI in the same way as the headline RPI, but weighted the items from the standard RPI to reflect spending patterns of the over-54s. The weighting was derived from the Living Costs and Food Survey (LCF, formerly the Family Expenditure Survey) an annual survey of around 5,000 households who provide a detailed account of their expenditure over time. Separate RPIs were calculated for 5-year age bands from 55 upwards, with an upper age band of 75+.
Fathom Consulting’s detailed report shows some interesting trends in how inflation affects older people, particularly the figures on pp. 6-7, which plot the Silver CPI against other measures of inflation. The plots show that, whilst now in 2010 the over-54s as a whole are experiencing a higher rate of inflation than that of the headline RPI, nevertheless the oldest age group, the over-74s, are experiencing slightly lower inflation than the headline rate, according to Age UK Enterprises’ measure; and in the periods 2004-2005 and 2007-2008, the headline RPI was actually higher than that of the retrospectively-calculated Silver RPI, perhaps due to higher mortgage rates during these periods.
The Silver RPI contrasts itself with the Office for National Statistics' (ONS) measures for retail prices for older people, the one-person and two-person pensioner RPI, which omit from their calculation those who receive more than 75% of their income from state benefits. The plots show that for matching age groups the ONS measures sometimes estimate higher prices (e.g. in early 2007 and mid-2008 to mid-2009), compared with the Silver RPI.
A striking histogram in the report plots the estimate of the proportion of spending on mortgage interest payments. The proportion spent on mortgages, which is estimated to be about 34% for the standard RPI, is only 16% for the 55-59 age group, and decreases to 7.5% and 1% for the 60-64 and 65-69 age groups, respectively. The proportions spent by the over 54s on “water and other charges” and “sugar and preserves” increase with age, as shown by equally striking histograms in the report. The older generation are eating their jam today?