The value of money has fallen by 94% over the last 50 years, according to new research from BM Savings.
Using data from the Office for National Statistics (ONS), it calculated that 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%.
Despite the low inflation of the last decade, £131 is required today for the same spending power as £100 in 2000.
BM Savings says that, 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.
Based on calculations by BM Savings, the average price for a pint of beer has risen 26 fold over the past 50 years from an average price of 11p in 1960 to £2.94 in 2010. The price for a pint could reach almost £8 by 2060 if prices rise by 2% each year. The prices of essential household items have also risen substantially since 1960 with the average price for a loaf of bread increasing from 3p in 1960 to £1.20 in 2010 a 20 fold rise.
Placing £100 in an instant access savings account in 1960 would have provided total gross interest of around £2,150 in the following 50 year period.
Suren Thiru, economist at BM Savings, said: “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.
