Aviva Age Inflation Index: Price rises continue to hit the young harder

18 Jul 2016

Price rises for the young are nearly twice the headline average

Inflation (Consumer Price Index) was today announced to be running at 0.5%, in the year to June 2016[1]. For 30 month's this headline inflation figure has been below the government's target of 2%. It last breached this figure in December 2013.

Too soon to judge Brexit impact

This data was collected prior to the EU referendum so it is premature to state what impact the referendum result is having on price inflation.

The hidden different experience by age

The headline figure of 0.5% is an average, but shopping habits differ by age. Aviva's analysis of typical shopping habits of different age groups[2] and the price movements of different services and goods[3] unveils a very different experience for different age groups.

Aviva's analysis shows that the under 30s are experiencing above average price inflation - nearly twice the level of those aged 65-74 and nearly three times the level experienced by those aged 75+.

In areas where the young spend more of their money - e.g. housing and education - prices are rising. In areas where the young spend less of their money - e.g. food and transport - prices are falling.

The under-30s currently carry an index figure of 89.7. This is significantly above all other age groups. The overall average is indexed at 46.6 - nearly half that of the under 30s. The 30-49 group are at 43.0; the 50-64 group are at 44.0; the 65-74 age group are at 39.0; and the 75+ age group are at 51.6.

Aviva comment

Commenting on the analysis, Alistair McQueen Savings & Retirement manager said:

'The under-30s are facing a double-whammy. Prices are rising faster in areas where they spend more, and rising slower, or falling, in areas where they spend less. It will be interesting to see what impact the EU referendum result, and the subsequent fall in the pound, has on this trend.

'These underlying differences are often hidden when we plan our finances. Price movements are outside anyone's direct control, but this does not mean we are powerless to act.

'There are two actions that the young can take. Firstly, careful and constant budgeting helps us manage the impacts of price movements. A simple understanding of money coming in and money going out will help defend us against 'hidden' price movements.

'Secondly, making any savings work harder to counter the effects of inflation makes good financial sense. An individual savings account (ISA) and a pension, with their positive tax advantages, would be a good place for many savers to begin.'

Aviva services

Aviva hosts a free online budget planner on its website to help all ages understand their money coming in and money going out - https://www.direct.aviva.co.uk/myfuture/BudgetPlanner

Aviva also offers all ages direct access to ISAs and pensions on its website - http://www.aviva.co.uk/retirement/saving-for-future/