Lee Mannion | Friday 5th August, 2022
Rising prices are impacting people across the UK, with almost every activity, commodity, and service observing increased costs.
The “cost of living crisis” is a term we all know too well. High levels of inflation have resulted in the crisis, with prices rising by as much as 41% in 5 years impacting the levels of disposable income alongside how much we can save for the long term, including our pension.
As levels of inflation soar at a far greater rate than wage and benefit increases, at Penfold, we have investigated the rising everyday costs and how this will impact our long-term savings.
On average, UK citizens spend as much as £666.70 a week, rising dramatically since 2017.
The price of our goods and services is only likely to grow, with many day-to-day items we take for granted expected to far exceed our budgets.
Saving money and ensuring that we have adequate investments is essential in achieving financial wellness. A pension pot is one of the best ways to look after our future selves, passively drip-feeding ourselves financial freedom so we have adequate money available when we retire.
Penfold can help you plan ahead, with resources such as our Pension Calculator and pension transfer service allowing you to plan ahead, secure future financial stability, and find comfort in retirement.
Earlier this year, the government announced new measures as a response to rising costs of living, stating that most lower-income households will be protected from the rapidly increasing inflation levels.
But with interest rates predicted to rise even more this October 2022, does this translate reliably when looking at the true costs people are facing due to the fluctuating economic environment?
When comparing essential living costs, everyday items and additional things Brits love to spend their extra cash on we can reveal the top 18 things we spend money on and how much they have increased in cost over the past five years.
It’s revealed in only five years prices have soared at the fastest pace in 40 years, within the last half-decade. The top three things that have increased the most since 2017 are:
*2025 Predicted Costs calculated based on the assumption that prices will increase at the same average annual rate seen in the 5 years to 2021/22.
The British tradition of going for a pint at the pub may have seen its day.
The cost for a pint of lager has risen 16% since 2017. It’s expected by 2025 the average price of a pint will be £4.42, almost a pound more than in 2017.
If you live in London however, the rise in costs is expected to reach £10 a pint far before 2025, with us predicting that the average cost for a pint of beer will reach £13.98 from £8 by 2025!
A pack of 20 cigarettes has increased by nearly £3 in the last 5 years, with the yearly rise in costs expected to reveal an average price of a 20 pack of cigarettes nearing £15 by 2025.
As the average UK smoker smokes 20 cigarettes a day, this amounts to over £5,000 a year!
Travelling to work, visiting friends, or taking a trip in the UK is about to become a stretch beyond our financial means.
More than a quarter of the salary of many individuals is already being spent on public transport annually, with this figure forecast to rise nearly 10% in the next three years.
As the price of fuel increases, so does the cost of our taxi journeys. The cost of an average Uber trip has risen 80% since 2017, from £10 to £18.
Although a standard journey of nearly £27 seems shocking, this is something that we can expect in the next three years.
Public transport isn’t any cheaper. When it comes to train travel, Brits have the highest prices compared to the rest of Europe at over 55p per mile.
In fact, the average across the whole of Europe sits at a lowly 14p per mile, less than one-third of the UK figure.
The average single person in the UK who isn't a homeowner now spends more than a third of their income on rent with rental prices surging by over a third in the last five years.
A report by Zoopla revealed that the average rent of a single person in the UK is more than a third of their income.
Rental rates are growing at their fastest rate since 2008, with a suggested 37% of a person’s salary going on rent. When including London, this is even higher, at an astounding 52%.
The national average continues to grow, with weekly rental prices averaging out at £256.14 weekly, resulting in a spend of £13,319.28 per year.
Buying a house in the UK requires having a deposit to put down at least 5% or 10% (for first-time buyers) of the value of your home. However, this requires substantial savings or support from family members - which isn’t always possible.
As a result, many do not have the ability to buy a home, and with house prices growing by 25% in the last 5 years, it’s becoming even more of a squeeze.
Before considering mortgage rates, the average spending has escalated from £223,807 in 2017, to £281,000 this year. Following this trend, we could see the average buyer paying £323,150 for a home by 2025.
Across the whole of the UK, hotel accommodation is increasing in price, often making it cheaper to travel abroad than stay at home.
The UK already had some of the most expensive hotel prices worldwide prior to the pandemic, with the average hotel costing £97.20 a night in 2017.
Between 2019 and 2021, prices rose by 41%, the equivalent of £300 more per week. In fact, in 2021, Tenby, Wales was the only UK destination that was cheaper than going abroad, compared to Estepona, on the Costa del Sol in Spain, but only by £10.
The accessibility of groceries is lessening for people with tight budgets.
Reliance on food banks is mirrored by the increasing price of staple goods like milk. Rising by 27.91%, since 2017, the price of milk has risen from 43p to 55p per pint.
Buying necessities suddenly feels like extravagant spending, with prices expected to continue growing yearly. By 2025, a 64p pint of milk is expected to be the norm.
This mirrors the reduced ability for us to enjoy the once normalised pleasure of grabbing a cup of coffee on the go. Many are choosing to opt-out of swinging by their local coffee shop, with prices soaring above 50% in the last 5 years.
To put this in perspective, a daily cup of coffee would cost Brits £225 annually in 2017, if they chose to buy one cup of coffee each working day.
In 2022, the exact same purchase would result in an annual spend of £840, hitting £1,154.40 in 2025, one-tenth of the current minimum wage!
How much would you pay to go and see your favourite artist perform? Whether you’re a diehard fan or not, costs nearing £150 for an average ticket surely seem excessive.
From 2018, when Taylor Swift fans observed a 1,150% increase in ticket costs, to this year when Bruce Springsteen was put on sale for $5,000 a piece due to Ticketmaster's 'dynamic pricing system.
On average concert ticket sales have seen a 98% increase in price in comparison to 5 years ago, the everyday gig-goer is getting priced out of seeing their favourite artists and a once inclusive activity is now only for the wealthiest of punters.
Streaming services are seeing higher levels of demand too, especially in a post-pandemic world. By 2025, we will have seen the monthly price of streaming service subscriptions increase by nearly double since 2017.
Dining out is becoming more of a luxury, and less of an option as the years pass by. The average meal out would have cost less than £30 back in 2017, whereas it is nearly £55 in 2022 and predicted to be nearly £85 in 2025.
Even fast food is getting expensive! For the first time in 15 years, McDonald’s has decided to raise the price of its trademark cheeseburger.
When the “saver menu” is requiring you to spend more, it becomes increasingly apparent how inflation is impacting all corners of society.
With McDonald’s serving more than 6% of the population daily, it’s estimated that the average person eats there once a week.
At the current rate of inflation, Brits will be spending nearly £20 a year on the fast food chain, assuming they opt for the cheapest menu item.
The average salary of a 30-year-old in 2022 is £32,965. In order to save enough for retirement, £357 per month is needed, or £4284 per year.
The average spend of 30-year-olds in the UK is £592.80 weekly or £30,825.60 per year. When combined, the outgoings come to £35,109.6, meaning most 30-year-olds are falling short by £2,144.60 on an annual basis.
The heightened levels of inflation we are experiencing do not align with how quickly wages have risen. An increase of 15.35% has occurred in the last five years, yet overall costs of living have nearly tripled by 41.27%.
The cost of living will continue to increase, making it all the more important to start saving for a pension.