PNC have created their Christmas index every year since 1983. It’s a light-hearted take on the more traditional Consumer Price Index. The PNC index evaluates the changing costs of supplying all the gifts of the 12 days of Christmas to ones’ true love.

Covid Index

We’ve written about the index before (you can see what we wrote in 2010, 2011, 2012 and 2014). However, the 37th index is different. The Covid-19 pandemic has had a significant impact. Live performances have been cancelled in the wake of the new social distancing rules, resulting in an unprecedented drop in the index of 58%.

Dancing ladies (x9), leaping lords (x10), Piping pipers (x11) and drumming drummers (x12) are all unavailable this year. Fortunately milking maids (x8) are considered key workers  and are available at an appropriate social distance.

Whilst the Christmas index is a little bit of fun, the impact of inflation should not be dismissed. It can have a significant impact on people’s standard living – particularly in retirement. Looking back at the last 37 years (the length of time PNC have been compiling their Christmas index) inflation has been significant. A basket of goods costing £100 in 1983 would cost £340 today.

The Real cost of Inflation

The real story though, and this is one of the areas we really help our clients in their retirement, is the return of the stock market over the same period. The same £100 invested in the FTSE All Share Index in 1983 would be worth £1,729 today. And that value doesn’t include all the dividends you’d have received since 1983 either.

Inflation is the silent destroyer of wealth. You don’t really notice it from year to year. But over the course of retirement it can have a huge impact. Investing to out-pace inflation is the only way to ensure you can maintain your standard of living in retirement.

If you would like to discuss this further, please get in touch with the team at Proposito either by e-mailing hello@proposito.co.uk or calling 01285 708444.