High net worth individuals are experiencing an inflation rate for goods and services of 9.5%, compar...
High net worth individuals are experiencing an inflation rate for goods and services of 9.5%, compared with 2.1% for the UK population at large, according to research by private bank Coutts & Co.
The Coutts Wealth Inflation Index (CWII) is based on the spending habits of the holders of Coutts' World Card, covering high income households whose expenditure is likely to be excluded from the widely accepted CPI and RPI inflation trackers. It is based on a basket of luxury goods and services, price-matched by Coutts over 12 months to gauge the rate of inflation.
Coutts said the number of wealthy individuals in the UK has risen significantly over the last few years, with around 112,400 people in the UK holding onshore liquid assets in excess of £1m, a figure predicted to rise by almost 13% by 2011. On average, income rises quicker for high net worth individuals (3.1%) than that of average UK incomes (2.3%), but the cost of premium goods and services is rising faster than prices of more freely available products.
In the past year, the price of jewellery has risen 25%, club memberships are up 17% and school fees up 7%. However, luxury cars have gone up only 3%, and the cost of eating out in a restaurant has remained broadly static, with a rise of 0.5%.
The 9.5% figure is based on consumers buying only high-end goods and services. It falls according to the proportion of an individual's spending that goes on goods and services in the standard CPI measure of inflation. With a quarter of spending on CPI goods and services, the inflation figure is 7.65%, falling to 5.8% for a 50/50 split of luxury and mainstream spending. The CPI basket was measured at 2.1% over the year.
Meanwhile, the Alliance Trust Research Centre has reported that older people in the UK continue to be more heavily affected by CPI inflation, as a greater proportion of their income goes on food and fuel. They face an inflation rate of 2.9% compared with the official headline rate of 2.2%.
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