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Value of money has fallen by two-thirds since 1982

IT was the year when Channel 4 was born, Britain went to war over the Falkland Islands and colour photographs were sent back to Earth by a space vehicle on Venus.

The Jam and Shakin' Stevens were in the charts, Michael Fagan made his unscheduled visit to the Queen's bedroom in Buckingham Palace, and the IRA's bombing campaign in London was at its height.

A lot has changed since 1982 – including the value of money.

New research has found it has dropped by two-thirds in the past 30 years.

That 67% drop means someone today would need £299 to have the equivalent purchasing power of £100 in 1982.

Similarly, £33.46 in 1982 would provide the same spending power as £100 today.

To enjoy the millionaire's lifestyle of the early 1980s today, big spenders would need to have at least £3 million tucked away in the bank.

The study by Bank of Scotland Private Banking shows the purchasing power of the pound to have eroded at an average rate of 3.7% a year.

This change is reflected in the changing cost of everyday items in the past three decades.

The research documents a roughly three-fold increase in retail prices since 1982. That is reflected in the price of a loaf of bread, which cost 37p in 1982 and £1.24 now.

Other supermarket prices which were considerably lower include carrots, which have seen a 146% rise to 86p a kilo from 35p a kilo, while a litre of milk was priced at 20p.

The average price for a detached property was £45,211 but that has risen approximately six-fold over the same period to £273,700.

A troy ounce of gold would have proved a good investment, rising by 439% from £203 in 1982 to £1096 today.

Running a car is also substantially more expensive now than then, with diesel prices 294% higher than in 1982. And a cup of coffee, then 97p, is now up 176% to £2.68.

Retail prices rose the most rapidly, by decade, between 1982 and 1992, going up at an average annual rate of 5.5%.

The lowest inflation rate occurred between 1992 and 2002, with retail prices increasing at an average annual rate of 2.4%.

Between 2002 and 2012, retail prices rose at an average of 3.3% a year.

Nitesh Patel, economist at the bank, said: "The value of money has fallen substantially over the past 30 years as retail prices and the cost of many everyday items has soared.

"Someone today would need nearly £300 to have the same spending power of £100 in 1982, meaning someone breaking the million pound mark 30 years ago would have the equivalent of £3 million today."

Future millionaires will need to earn yet more to enjoy the lifestyle of 2013 with figures showing that if retail prices were to rise by 2.8% annually, the value of money would decline by a further 56% over the next 30 years.

In this event, someone would need £229 in 2042 to have the same spending power as an individual with £100 today.

They would need nearly £2.3m to enjoy the equivalent lifestyle of a person with £1m today. Mr Patel added: "Looking to the future, even if inflation is kept firmly under control and rises only in line with the Government's target, it is likely the value of money will continue to reduce significantly and decline by more than half its value by 2042."

Contextual targeting label: 
Finance

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