- £1 million in 1973 would provide same spending power as £10.5 million today
- A pint of milk has increased by 667% in 40 years
- £100 in 2053 could be the equivalent of £311 today
The research shows that a more than tenfold increase in retail prices means that someone today would need £10,553,000 to have the equivalent purchasing power of £1,000,000 in 1973. On the flip side, just £9.48 in 1973 would provide the same spending power as £100 today.
The purchasing power of money has eroded at an average rate of 6.1% a year over the past 40 years. By decade, retail prices grew the most rapidly between 1973 and 1983 at an annual average rate of 13.6%. The lowest increase in inflation came over the period 1993 to 2003 with an annual increase of 2.6%. In the past decade to 2013, inflation has averaged 3.3% per year.
The changing value of money is reflected in the cost of everyday items. The average price for a pint of lager has grown 20 fold over the past 40 years, from an average price of 14p in 1973 to £2.87 in 2013.
The prices of essential household items have also risen substantially since 19731 with the average price for a loaf of bread increasing over twelve times, from 11p to £1.30 in 2013; a pint of milk from 6p to 46p (667% rise); and instant coffee from 28p to £2.67 in the 40 years to 2013.
The average price for a detached property has risen approximately eighteen times over the same period from £16,980 to £305,3912, while a troy ounce of gold has increased 30 fold from £34 in 1973 to £1,051 today. Similarly, fuel costs have risen substantially with diesel prices now 18 times higher than in 1973.
Looking to the future, if retail prices were to rise by 2.8% annually3, the value of money would decline by a further 67% over the next 40 years. In this event, someone would need £311 in 2053 to have the same spending power as an individual with £100 today – or over £3 million to enjoy the equivalent lifestyle of a person with £1 million today.
Ashish Misra, Head of Investment Policy at Lloyds Bank Private Banking, said: “There is no doubt that the value of money has fallen dramatically since 1973 as a consequence of the substantial rise in the general level of prices. It is likely to be reduced significantly further over the next 40 years even if inflation is kept firmly under control.
“One million pounds is still a lot of money even though inflation has substantially eroded its purchasing power over the past four decade. Although £1 million cannot fund the lavish lifestyle it once could, it can still go a long way with careful financial planning.”
