Some say that inflation is good. Your mortgage equity erodes, while the price of your house goes up, for example! This is an argument in favor of an interest-only mortgage, which advisers do not recommend. Refunds are much lower if principal is not repaid. Take an extreme example: 35 years ago I arranged a mortgage for a lady to buy a house in End Terrace, she paid £8,995 for it and wanted a 95% mortgage of £8,545 with a £450 deposit. Today the house is worth £160,000 and he would still have a mortgage of £8,545 if it had been interest only. People take out more than that for car financing today!

100 years of inflation has meant that teachers’ annual pay has risen from £176 per year to £30,889 per year on average. Gold was trading at £18.93 an ounce, now above £600 an ounce and still rising.

In 1971 the UK went Decimal – this was a good excuse to raise prices, which many people fear will also be the case if we join the Euro. Inflation can be judged by Mars Bars, which are often referred to in price comparison charts. In 1982 a Mars Bar cost 0.16 pence, now more than 0.45 pence. Taking this price increase into account, let’s use quantities of Mars Bars to compare inflation:-

Items – March 1982 bars – March 2007 bar

House – 147,775 – 474,053

Porsche 911 – 104,500 – 170,000

Double Aga Gas Oven – 6,218 – 15,121

Washing machine – 1,875 – 560

Gallon Gasoline – 10 – 11

Pint of beer – 4 – 7

Frozen chicken – 4 – 10

Now let’s look at pensions. If you applied for a Personal Pension, as I did, and paid £100 a month from the age of 30, you were projected to receive a pension of approximately £12,000 a year or 6,250 Mars Bars a month at age 65. In fact, now at age 55, with diminishing returns and having paid for 25 years, the projection has been reduced to £3,000 a year or 555 Mars Bars a month.

So you could say that ‘A Mars A Day – Helps you work, rest and pay’!