Inflation at 2.7%, why do savings need 3.8% to beat it?

patientperson

Glen_Clark wrote: »

There is another factor.
Politicians have now drawn up 2 different rates of inflation;
RPI - the higher one they use to calculate their own index linked pensions.
CPI - the lower one they use for us

These politicians are good at figures when it affects themselves.

2010

There is of course your own personal inflation, which is the real inflation.

jimjames

2010 wrote: »

There is of course your own personal inflation, which is the real inflation.

And that differs for everyone. The headline figure is only an average.

So if you spend a lot on heating for example and prices go up 10% then your rate will be much more than 2.7%

kidmugsy

The man who introduced the CPI to the UK was Gordon Brown. Nuff said.

theGrinch

inflation is different for different people

Linton

prowla wrote: »

Does anybody believe the published inflation figures?

Yes. Unlike, I guess, those posters who are convinced the whole thing is a devious plot I have detailed expenditure figures going back nearly 15 years.

The increase in my "basic" expenditure which includes food, clothing, utilities, fixed and mobile phone usage, broadband access, insurance, and car insurance, maintenance and tax since 2003 (the earliest date CPI figures are available) is lower than would be expected from the CPI figures. During that period my standard of living hasnt changed.

LittleMissAspie

Linton wrote: »

Yes. Unlike, I guess, those posters who are convinced the whole thing is a devious plot I have detailed expenditure figures going back nearly 15 years.

The increase in my "basic" expenditure which includes food, clothing, utilities, fixed and mobile phone usage, broadband access, insurance, and car insurance, maintenance and tax since 2003 (the earliest date CPI figures are available) is lower than would be expected from the CPI figures. During that period my standard of living hasnt changed.

I was going to make my own personal inflation basket but even that's not necessarily the "correct" rate of inflation. Maybe your tastes have changed and you eat more or less expensive food types now. Maybe you moved house and one was more expensive to heat than the other, or maybe your kids have moved out and you use half as much water. Maybe your broadband is faster than it was, maybe your mobile can now replace your camera and map books. Maybe your no claims bonus has been building up during those ten years and maybe your car has changed. So I decided not to bother with my own basket, my tastes and circumstances change so I wouldn't be able to compare like with like.

BobQ

kidmugsy wrote: »

The man who introduced the CPI to the UK was Gordon Brown. Nuff said.

But he did that to preserve RPI. It was supposed to be the index that was comparable to other nations measures where housing costs (a significant part of RPI) were generally not included or were less significant because they were not obsessed with home ownership.

ColdIron

BobQ wrote: »

But he did that to preserve RPI. It was supposed to be the index that was comparable to other nations measures where housing costs (a significant part of RPI) were generally not included or were less significant because they were not obsessed with home ownership.

But surely if the UK is obsessed with home ownership it then follows that RPI is an accurate yardstick to gauge our inflation

CPI is just a fabrication that measures nothing meaningful but is a useful metric to peg spending and, more damagingly, future spending projections against

prowla

My eating habits have changes and I watch the price of things I buy. I've cut out most of the more expensive items.

According to Wiki, the CPI has more than doubled since 1988 (http://en.wikipedia.org/wiki/File:United_Kingdom_CPI,_1988_to_present.svg).

The CPI takes the geometric mean of prices rather than the arithmetic mean, which usually gives a lower number.

Including things like broadband and mobile phones in it may not be a fair item, as they would have been high priced and only available to a select few initially, and then acceptance would be much wider as the price dropped. Therefore, they would likely represent a price increase to many people as they would not have even had one earlier in their development.

Energy and many staple foods have gone up enormously in the past few years, and anything which does not reflect that is fudging the figures.