Gut-busting inflation

baby_boomer

guitarman001 wrote: »

The only positive side is half my savings are in NS&I index-linked

Thoughts?

Pat yourself on the back and quit worrying!

atypical

dreamypuma wrote: »

Breads gone up.

The price of mine has actually gone down. An Asda smart price loaf was 50p not so long ago, now it's 47p - a 6% drop. Better factor it into my personal inflation rate.

lvader

I haven't increased my food budget for something like 10 years.

GeorgeHowell

To come back to the original question, inflation is a worry for those whose expenditure is especially affected by itbut whose income does not necessarily increase to match it . As with most complex subjects there are a number of reasons :-

The B of E monetary committee has changed its terms of reference without announcing it, and is now more concerned with avoiding a double-dip recession.

Most of the the members of the committee appear to be like rabbits caught in the headlights -- frozen into inaction.

Some economists believe that a rise in interest rates would not substantially reduce the present, allegedly cost-push inflation, and that it will correct itself in the short/medium term. Therefore no action is being taken to deal with it.

As yet wage increases are generally not matching inflation so the case can be made to have relatively little fear of escalating inflation.

Insufficient action is taken in this country to deal with, and regulate, cartels that opportunistically cause much of the inflation -- eg energy companies.

Older people on pensions and fixed incomes tend to be the worst affected by inflation, especially when interest rates are low. Politically, it is easier to disaffect this group than younger people who might be worst affected by higher interest rates. The UK is a youth-obsessed, ageist society, and the largely mythical notion of the younger generation being screwed by the so-called baby-boomers is growing in acceptance. When it comes down to it, older people are much less likely to desecrate the cenotaph in protest. But they have little chance of effectively protesting via the ballot box either because no major party looks like reversing this ageist stance any time soon.


Things go in cycles and in recent years those depending on higher interest rates and lower inflation have not done so badly. In five years time we might well have gone back to that.

opinions4u

Older people on pensions and fixed incomes tend to be the worst affected by inflation, especially when interest rates are low. Politically, it is easier to disaffect this group than younger people who might be worst affected by higher interest rates.

On the other hand, you could argue that most pensions have some form of indexing built in to them and for many years pensioners have benefited from a guarantee that their pensions will rise by the rate of inflation each year (although pressure groups weren't happy with this because wage inflation was higher).

The UK is a youth-obsessed, ageist society, and the largely mythical notion of the younger generation being screwed by the so-called baby-boomers is growing in acceptance. When it comes down to it, older people are much less likely to desecrate the cenotaph in protest. But they have little chance of effectively protesting via the ballot box either because no major party looks like reversing this ageist stance any time soon.

Come off it. Free TV licences, higher tax thresholds, free bus travel, free coach travel, winter fuel allowances to subsidise 6 weeks on the Costa Warma etc etc, half-price this that and the other .... I'm not saying the older generation have it perfect, but they have an awful lot of state subsidies that aren't means tested and an extraordinary power at the ballot box (which they are more likely to use than the 18-22 age group).

Just because somebody is old doesn't automatically mean that they are hard up or suffering from the effects of inflation. There is a group of pensioners who have a better guarantee than the rest of us - occupational pension with index linking and state pension with index linking too.

GeorgeHowell

I think your argument does hold good for those pensioners who have a decent pension (relative to their former income), and/or substantial savings to fall back on. However for a variety of reasons many do not, even if pensions are wholly or partially index linked, and especially those not benefiting from 100% inflation-proofed state sector pensions. Substantial inflation together with negative real interest rates will cause hardship for them, but they are being sacrificed especially after NS&I had the audacity to withdraw index linked certificates.

The perks for seniors are not all that valuable for most. Bus passes are of limited use for many, considering the unreliability of public transport. £250 heating allowance does not go all that far, even on the Costa Packet, given present exchange rates. TV licenses are of course only free when you really are getting on a bit.

I agree that not all pensioners and older people are having a really bad deal, but some are. One thing that could have been done to help balance things out a bit in the present climate would have been to retain index linked certificates for over 60s with a real rate of, say, 0.5%. I also agree that the grey vote has potentially a lot of power at the ballot box. Maybe it used it in May to help unseat Labour, which is responsible for a lot of the problems the older generation faces (and the younger one too come to that) , not least of which was decimating the private pension sector in order to help pay for unaffordable public sector pensions.

Rollinghome

GeorgeHowell wrote: »

...not least of which was decimating the private pension sector in order to help pay for unaffordable public sector pensions.

Now I'm confused. Are you now saying that some pensioners are getting too much?

Is the problem really that those in the public sector are too well provided for or is it that those in private sector, who perhaps gave less attention to their pension requirements, receive too little?

We do seem to have an unattractive culture of envy here that prefers to pull down those who do well rather than concentrating on raising those who do less well. The responsibilty for the latter without adequate pension provision for whatever reason will presumably fall on the state anyway.

GeorgeHowell

Public sector pensions became unaffordable under Labour for demographic reasons and also because Labour inflated the size of the public sector so much. The solution would have been to increase contributions substantially, but they did not have the political courage to force that through. At the same time they largely contributed to the decimation of a high proportion of pensions in much of the private sector.

In an ideal world everyone would have a decent pension, but the have-now-pay-later mentality of modern Britain means that younger generations are not willing to sacrifice now for decent pensions later. The worst of all worlds is what we have now -- pensions which are not great for many people, but on top of that a damaging and divisive inequality between the state and private sectors. The relatively high inflation, fairly static stock market, and low interest rates which we have at present only adds to the overall problem.

talexuser

Don't you remember the first thing Brown did when Labour came to power was to grab the tax relief from private pensions reinvestment getting the government billions per year that would have gone into private pensions. This on top of the long pension contribution holidays of the large companies in the Thatcher years, killed off one of the best private pension systems in the world for those who built up years worth of contributions.

Both Tories and Labour have to hang their heads in shame for what they did to final salary pensions in this country.

baby_boomer

Maybe inflation will look after itself in due course.

It's not as if banks are lending much to individuals or to companies. Regulatory requirements and governments mean that they are having to rebuild capital - while facing the possibility of future losses over the European sovereign debt crisis.

And it's not as if people will have much to spend after 1st January.