Inflation Calculation

[Bert45]

I'd like to know what £1000 20 years ago would be equivalent to today. I've been online, of course, but the calculators don't give me what I want to know. To be clear, what I want to know is the value of £1000 in 1998 in todays's terms. This is not the same as asking how much would I need today to buy the same as I could buy for £1000 in 1998. I would obviously need more, but I want a figure that is less, as money is worth less today than it was in 1998.

[Peter Pedant]

go here
https://www.ons.gov.uk/economy/inflationandpriceindices/datasets/consumerpriceinflation

clcik on re-referncing - it give the figures for RPI

the answer for 1998 seems to be £700

[fiction-factory]

I'll have a look later, PP, but the figure of £700 seems higher than I'd have though- it suggests an average inflation rate of 1.8%
1000/(1.018)^20 = 700
I suppose we did have almost zero inflation for a while though so maybe it's right

[Bert45]

The reason for my question was actually to try to find what a flat rate pension set at £X000 p.a. today would (or might) be worth in 20 years' time. As nobody can estimate or guess what is going to happen to inflation over the next 20 years, I thought it would be as good a starting point as any to see what has happened to the value of £1000 over the past 20 years. I could have done the reverse calculation, but I was annoyed that I couldn't put £1000 and 1998 into two boxes on the interweb and get the answer that I wanted.

[Peter Pedant]

Hi FF
I reckon the inflation rate from 1988 is around 3.4%
er my own calcs from the figures
and this gives the discount value of £300 (1988)over the last twenty years which I think is too low

I still remember kindly the advice ( er solution ) to the dynamics problem from a few years ago - have a good one

hey new info!

Booboo was using historuical data to try to model pensions!

but pension modelling is the subject of my first ref
so all he has to do is read that
future pension modelling involves guessing what the inflation rate will be
and we dont know
ALSO the last twenty years numbers may NOT be a good guide to the future ....

guess right and you will be as rich as Croesus - well the sage of Omaha at least

[Peter Pedant]

Bert the decision is yours
and v diff to make
and NOT only dependent on inflation figures
fr'instance

I took a larger lump sum and smaller pension in Jan 2012 - cross over date ( bad deal date at least 2032 ) - if I survive to 2032 then it was a bad deal
and was diagnosed with stage III lymphoma in Mar 12.
wow - good call there then ! - er but I still have the cancer

swings and roundablouts

[Peter Pedant]

well found it
here is the discount table for integer percentages
( whole numbers to you AB thickos )

http://www.financingcp.org/docs/CP3_NPVTable.pdf

which allowed it self to be relatively easily found oonce I had left it over night

Look at 7% - it looks like it loses half its value over ten years which is kinda true

and I thought average inflation was 3.5% over the last twently years - and yeah the value should be half again in twenty years

made a bit of a mess of that - and the 5% and 10% look familiar from my exams....

knew I could find it

[bainbrig]

PP’s “mars bar” system is excellent (i.e. how much did one cost 20 years ago, how much now).

Petrol is also very interesting. Although it seems to be at a shocking price now, once you see it against average wages, it is in fact similar to 1973.

[Peter Pedant]

and if you think that the average UK inflation rate over the last twenty y has been 2.54% ( reasonable)

then you can average ( interpolate ) between 2 and 3 - whcih is 0.6730 0.5537 0
you get .61
that is £1000 twenty years ago is worth £610
which we almost had at the very very beginning

[Peter Pedant]

really for myself since I have spent an enjoyable day re-fongoing thios out

the formula for discounting is 100 / ( 100 + r ) so that is for 5% is 100/100+5 and note the first year is NOT £95
but is £95.24.

whereas for inflation and interest - at 5% the first year really is £105

which I kinda really knew but you can see why this isnt tested in skoolz