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What is the impact of inflation on our spending and saving?

The longer we live, the more impact inflation is going to have on our spending and saving power.

Over the last 60 years the price of everyday items like bread, milk and sugar has risen by thousands of percent.

What you could buy for £100 just 60 years ago could cost you around £2,300 today![1]

So how do you think the cost of a loaf of bread has changed over the years? Use our inflation calculator to find out – and imagine the effect this will have on the cost of your funeral too.

How much do you think a loaf of bread would cost in:
£
£
£
Look at how prices are rising

A loaf of bread in 1995

You thought it cost
1.00
Actual cost
2.00

A loaf of bread in 2017

Actual cost
1.50

A loaf of bread in 2024

You thought it would cost
80
Forecasted cost
6,106
Loaf of Bread
A loaf of bread is forecast to cost £1.35 in 2024.
That's
5 more
than you thought
78% of customers underestimated the impact of inflation in 2024

With inflation pushing up the prices of everyday items over the next 7 years, what impact might this have on funeral costs?

See the rising cost of funerals
 

What does inflation affect?

Inflation affects more than just the price of bread. Interest rates on current and savings accounts are linked to inflation rates, which is why savings accounts currently represent a tiny return on investment.

Typically, pensions and benefits are also index-linked to inflation rates. It is also common for companies to set pay rises in line with inflation, though in recent years the ongoing effects of recession have driven a wedge between wages and the cost of living.

Historically, inflation rates have fluctuated significantly: but over time, the effect is always for things to become more expensive. And when the cost of living increases beyond the interest rates accrued by your savings accounts and investments, it’s important to know if any money you’ve put aside in savings will increase enough to cover the cost of your funeral in the future.

How are inflation rates calculated?

Inflation rates are actually calculated in a number of ways, but the one people are usually talking about when they discuss inflation is the Consumer Price Index (CPI)[2]. This is visualised as a basket of goods, which people buy frequently. The prices of the items in the basket are tracked over a period of time, and the percentage by which those prices rise becomes the inflation rate.

Looking at the contents of the CPI basket can be fascinating. Over time, the changing items in the basket show trends coming and going, technology developing, and society evolving. In 2012, for example, bundles from television providers (TV, internet, and phone) were included in the basket for the first time, while the rising use of digital cameras meant that film developing costs were taken out.

How these prices increase over the next 12 months will help determine the UK inflation rate. This will impact the cost of everything we buy in the future, including funerals.

References

  1. Bank of England: Inflation Calculator (April, 2017) 
  2. Office for National Statistics: Consumer Price Inflation: Mar 2017 (April, 2017)

 

Tool Calculations

 

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