As the £2 coin turns 25, here’s what it bought you in 1998

Inflation has significantly eroded the purchasing power of the £2 coin over the last 25 years to almost half its value at just £1.07 today.

In 1998, Tony Blair was Prime Minister, The Truman Show movie was released, France won the World Cup – and the first bimetallic £2 pound coin was circulated in June. 

You would have been able to buy two pints of lager or 20 Cadbury Freddo bars for £2 back then.

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On the 25th anniversary of the circulation of the £2 coin in the UK, new analysis from M&G’s Investment looked at how inflation has eaten into its value.

A bimetal £2 coin left in a piggy bank back then would be worth just £1.07 today, or if put in a typical cash savings account it would be worth £2.90.

But it would be worth just over £6 if it had been invested in the FTSE All-Share Index over the 25 years.

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Shopping baskets are lighter today than in 1998

With food price inflation rising at the fastest rate since the 1970s, £2 coins will go a go a lot less far for consumers in the supermarket than 25 years ago.

Shopping basket essentials in particular have taken a hit, with £2 only buying you one loaf of bread in shops today, compared to four loaves 25 years ago.

Not to mention Freddos. Sweet-toothed consumers could pick up 20 Cadbury’s Freddo bars in 1998, but only eight bars with their £2 coin today.

However, people aren’t just left with less in their supermarket trolley. Depending on where you are geographically today, you are likely to get less than half a pint of lager with your £2 coin, compared with two pints in 1998.

If you are a car owner, a £2 coin will now only get you 1.4 litres at the petrol pump, whereas you could have bought 5 litres with the same £2 coin 25 years ago.

Parit Jakhria, head of long-term investment at M&G, said: ‘With huge rises in the cost of living across the UK in recent years, we are all feeling how dramatic the impact of inflation can be on our shopping baskets.

‘However, it is equally important to see the longer-term impact of how inflation can eat away at your savings. At a time when every pound counts, the 25-year anniversary of the bimetal £2 coin serves as a reminder of the long-term corrosive effects of inflation.

‘Yet for those able to put their cash to work and accept an element of risk, our analysis shows that you could turn even a modest investment into a healthy pot of money over time, and more importantly maintain and even increase your real purchasing power.’

If you had invested £2 in a multi-asset fund since 1998, it could now be worth £7.60 according to M&G, leaving you able to buy a bit more for your hard-earned money. 

The Royal Mint does not disclose the cost of minting coins, or the exact weights of each metal used. However, the M&G analysis estimates that the current metal value of each £2 coin is around £0.09.

This marks a more than 450 per cent increase in the value of the physical metal used in the coin since its first circulation.

This post first appeared on Dailymail.co.uk