The 25th anniversary of the £2 coin reminds us of its declining value over the years. Inflation has reduced its worth by almost half, leaving it at just £1.07 today. Back in 1998, the year the coin came into circulation, it was possible to purchase two pints of lager or 20 Cadbury Freddo bars with £2.
A recent analysis by M&G’s Investment revealed that if a bimetal £2 coin was saved in a piggy bank since 1998, it would now be worth £1.07 in real terms. However, if it had been placed in a cash savings account, the value would be £2.90. Investing the coin in the FTSE All-Share Index would have grown its worth to over £6.
In terms of what £2 could buy in 1998 compared to today, there has been a significant decline. Today, £2 can only purchase one loaf of bread, whereas it could buy four loaves 25 years ago. Similarly, the number of Cadbury’s Freddo bars you can buy with £2 has dropped from 20 to 8.
The decline in purchasing power is also evident in other products. With rising food price inflation, £2 no longer stretches as far in the supermarket. Additionally, depending on your location, you could only buy less than half a pint of lager with a £2 coin, compared to two pints in 1998. Car owners would also notice a significant difference, as a £2 coin can now only buy 1.4 liters of petrol, whereas it could have bought 5 liters 25 years ago.
Parit Jakhria, head of long-term investment at M&G, highlights the impact of inflation on our shopping baskets and savings. However, he also emphasizes the potential for growth and maintaining purchasing power through investment. According to M&G’s analysis, a £2 investment in a multi-asset fund since 1998 could now be worth £7.60.
It’s interesting to note that the value of the metal used in the coin has increased by over 450% since its first circulation. The Royal Mint does not disclose the exact costs, but M&G estimates that the current metal value of each £2 coin is around £0.09.
In conclusion, the 25th anniversary of the £2 coin serves as a reminder of the impact of inflation on our daily lives. While its purchasing power has declined over the years, there are opportunities for growth through investments, allowing individuals to maintain and increase their real purchasing power.
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