£85.6m today is equivalent to £1m in 1907

Alternatively, £11,700 in 1907 would have had the equivalent spending power to £1 million today, according to new research from Bank of Scotland International.

Looking over the past 50 years, an individual would need £17.2 million today to fund the same lifestyle as someone with £1 million in 1957.  Somebody would now need £2 million to have the same spending power as having £1 million in 1987. 

Even the relatively low inflation of the past 10 years has had a marked effect on the value of money so that someone would need £1.3 million to have the same spending power as £1 million in 1997. 

Inflation will markedly reduce the value of £1 million over the next 50 years even at low rates

Low rates of inflation will still significantly reduce the spending power of £1 million over the coming years.  The value of £1 million will be cut by nearly two-thirds over the next 50 years even if inflation rises in line with the government's target of 2% a year.  In these circumstances, an individual will need £2.7 million in 2057 to fund the same lifestyle as £1 million today.

The corrosive effects of inflation mean that a lump sum of £1 million is worth more to a 50 year old compared with a 20 year old.  When today's 50 year old reaches the age of 60 in 2017, £1 million will be worth £820,300 in today's terms.  This is in sharp contrast to today's 20 year old whose £1 million will be worth £452,900 when they are 60 years old in 2047.  (Calculations are based on annual inflation of 2% a year.)

£1m still remains a considerable sum

Although £1m no longer finances the lavish lifestyle it once did, it remains a substantial amount of money.  For example, placing £1 million in a high interest savings account paying 5% would yield gross interest of £50,000 per year, or £38,889 after tax (assuming no other income). 

Tony Wilcox, Managing Director at Bank of Scotland International, said:

"There is no doubt that £1 million is still a lot of money although inflation has substantially eroded its purchasing power over the past 100 years. The value of £1 million will be reduced significantly further over the next 50 years even if inflation is kept firmly under control.  Whilst £1 million is no longer enough to fund a lavish lifestyle, it can still go a long way with careful financial planning."