Low income households 'face higher inflation'

11 April 2012

Older people are likely to be finding it hard to balance their finances at the moment after new figures released by the Alliance Trust Economic Research Centre indicated that it is the lowest income households that are affected by the highest rates of inflation.

It highlighted the fact that even though inflation has dropped from above five per cent to a little over three per cent over the course of the last few months, those earning less than £8,300 a year are going to be affected by a larger rate.

Senior economic analyst for the Alliance Trust Economic Research Centre Linsey Thomson stated the reason lower income households - that are likely to include a large percentage of pensions - see higher rates of inflation is because they have to allocate a bigger proportion of their budgets to utilities and food.

Energy prices

With energy bills rising all the time and the price of food also on the increase, this means a lot of older homeowners may be looking into products such as lifetime mortgages in a bid to ensure they can be more financially stable during their retirement.

"During 2011, we saw a sharp turnaround as the highest income households now face the lowest rate of inflation, helped by the fact that they benefit the most from lower audio visual prices," said Ms Thomson, while research by the body also found around a quarter (26 per cent) of spending is allocated to housing and utilities.

Food bills

Lower income households were shown to allocate as much as 15 per cent of their cash on food, which the centre said leaves them vulnerable to higher food prices.

Last month, research from the group showed that although the headline rate of inflation was down to 3.4 per cent from 3.6 per cent in March, older people are affected by a much higher rate.

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