Pensioners' Cost Of Living 'Soars By 20 Per Cent'

Old People

First Posted: 18/10/11 15:28 Updated: 18/10/11 15:28   PA

Pensioners have seen their cost of living soar by around 20% since the start of the credit crunch, Saga has said.

Compared with four years ago, costs have risen by 14.4% for the population as a whole but are up by 18.5% in the 50 to 64 age group, by 20% among 65 to 74-year-olds and by 20.2% for those aged 75 and over, Saga's figures showed.

The over-50s lobby group said rising gas and electricity prices have disproportionately increased inflation rates for older people.

Saga director general Ros Altmann added that anyone who has bought an annuity, which pay out a fixed income for the rest of their life, was seeing their buying power eroded month after month. "Continuing to allow inflation to silently steal older people's assets is not a recipe for economic recovery," she said.

Patrick Bloomfield, a partner at pensions adviser Hymans Robertson, said pensioners will also feel aggrieved at the Government's decision to use the Consumer Prices Index (CPI) measure of inflation to determine future benefits.

"With CPI 0.4% lower than RPI (retail price index), a 60-year-old retiring today on an annual pension of £10,000 would receive £30,000 less over their lifetime if that gap is maintained," he said.

However, with inflation running above 5% he said many pensioners were still set for an improvement in their circumstances next year. "If the pace at which prices increase slows down in 2012, as many economists predict, these pensioners could actually enjoy a small boost in their purchasing power next year," Mr Bloomfield said.

Comparison website Moneyfacts said that to beat inflation, a basic rate taxpayer at 20% needs to find a savings account paying 6.5%, while a higher rate taxpayer at 40% needs to find an account paying at least 8.67%.

Moneyfacts said the effect of inflation on savings means that £10,000 invested five years ago, allowing for average interest and tax at 20%, would have the spending power of £9,309 today. Moneyfacts.co.uk spokeswoman Sylvia Waycot said: "Today's news offers absolutely no hope for anyone relying on savings interest to help pay for rising food and fuel bills.

"The rate of inflation means hundreds of thousands of savers need accounts paying an unattainable 6.5% before they earn a real rate of return on their money. Anything less means they will fall into 'the eroding spending power trap' which has already wiped almost £700 off the spending power of £10,000 in five years."

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Filed by Ned Simons  |