Falling value of the fiver in our purses

As the paper £5 note is withdrawn from circulation today - May 5, 2017 - after 60 years, new research shows how its value has fallen by an eyewatering 96 per cent.

Purchasing power

Sarah Deaves at Lloyds Private Banking which carried out the study, said: "The old £5 note issued in 1957 had a strong purchasing power back then when households could buy a basket of goods from their grocer with change left over for a pint or two of beer.

Today that purchasing power has been eroded significantly due to the substantial rise in the general level of prices.

The research shows that a twenty-three fold increase in retail prices means that someone today would need £113 to have the equivalent purchasing power of £5 in 1957.

The rising cost of your shopping basket

The prices of essential household items have also risen substantially since 1957 with the average price for a loaf of bread increasing from 5p to just under a £1 and a pint of milk is up from 3p to 43p. The cost of a kilo of cheese has gone up from 23p to £8.38 today and, a hearty pork loin now costs £7.40 per kg compared to just 48p six decades ago.

A basket of these goods plus a bag of sugar, a kilo of butter, a dozen eggs and 1.5 Kg self-raising flour would have cost a little over £2 in 1957; today the same basket of goods costs, on average, £23.99 – an increase of 1,068%.

More pay in your pocket

While goods have gone up, so luckily have our wage packets, up 4,142%, from £12 in 1957 to £509 today.

Quids in

Despite stock market ups and downs, UK shares have outpaced cash over 60 years and your £5 invested in the stockmarket in 1957 would be worth £427 today, a increase of 8,443%. “If you'd invested in 1957 your investment would have outstripped inflation many times over, which suggests that taking a longer-term view of investing can pay dividends,” says Sarah.

Fiver in the future

Looking to the future, if retail prices were to rise by the current rate of retail price inflation, 2.8% annually, the value of money would decline by a further 80% over the next 60 years. In this event, someone would need £26.22 in 2077 to have the same spending power as an individual with £5 today.

Shoppers are being urged to spend the old £5 by today as the paper note will cease to be legal tender. However, your bank and the Post Office may allow you to swap old £5 notes for new versions.