An 18 fold increase in retail prices means that someone today would need £1,796 to have the equivalent purchasing power of £100 in 1960. Conversely, £5.57 in 1960 would provide the same spending power as £100 today.
Over the past 50 years, the value of money eroded most during the 1970s with retail prices rising by an average of 13% a year.
Retail prices rose by the least during the 2000s with an average annual increase of 3%. However, even the relatively low inflation of the past 10 years has had a marked effect on the value of money with £131 required today for the same spending power as £100 in 2000.
Over the next 50 years, the value of money could decline by 63% if retail prices rise each year in line with the Government's target for consumer price inflation of 2%. If this happened, someone would need £269 in 2060 to enjoy the same spending power as an individual with £100 today.
Suren Thiru, economist at BM Savings, commented: "There is no doubt that the value of money has fallen dramatically since 1960 as a consequence of the substantial rise in the general level of prices.
“It is likely to be reduced significantly further over the next 50 years even if inflation is kept firmly under control.
“However, today's typical saver is very different to half a century ago with a much greater proportion of savers now viewing their savings as an investment, whereas 50 years ago peoples' primary motive for saving was probably a precautionary one. A saver's nest-egg will still go a long way with careful financial planning."
