This week, Age UK launched the Age UK Enterprises Silver RPI, the most comprehensive measure of how inflation impacts those over 55. It was prompted by our recognition that those in later life experience different financial pressures to those of the general population and that existing measures fail them. This is because they do not consider housing costs and worse, treat the over 55s as one homogenous group who have identical experiences of money and inflation.
We went to former Bank of England inflation specialists, Fathom Consulting, to help us design the Silver RPI. It is based on a reweighted RPI basket of goods which has been constructed to better reflect the day to day spending patterns of those at five year age cohorts over 55. Going forward it will be updated monthly and published quarterly to coincide with the Bank of England inflation report.
The inaugural report was published this Thursday 11 November and is currently available to download at http://www.ageuk.org.uk/silver-rpi. The research is striking. The Silver RPI shows that, in the last two years, over 55s have actually experienced average price rises at almost two per cent above the headline RPI rate of 4.6 per cent. And worse of all, this disparity increases with age with over 75s currently experiencing cost increases at almost four per cent. In real terms, the discrepancy between real and headline RPI leaves an average 60 year old £600 a year worse off than thought.
This week, ahead of the national media launch mid week, we shared the findings of the Silver RPI with stakeholders, including the ILC-UK, at a roundtable breakfast hosted by the BBC’s Chief Economics Correspondent, Hugh Pym. There was a heated debate around the implications of the findings but what was reassuring was the shared consensus around the table of the need for greater understanding of how money changes as you age.
Our fundamental belief is that those in later life have unique financial needs that need to be better understood so that they can be met. Firstly, it is critical that those at or in retirement have an accurate, up to date measure of how their everyday costs are changing year on year. This is because more than any other group, those aged over 55 have to financially prepare to provide for their future and currently face acute financial pressure.
Secondly, the Silver RPI demonstrates that the financial services industry as a whole has to reassess how it views those in later life and develop, as we do, tailored products and services to best meet their needs. The current one-size-fits-all model is not fit for purpose.
The financial services industry ignores the needs of this growing market at its own peril. As the population continues to age, the challenge of recognising and meeting the diverse needs of those in later life will only become more important.
Gordon Morris is the Managing Director of Age UK Enterprises