Inflation costs over 55s an extra £978 per year
On the one year anniversary of the Silver RPI, a measure of inflation as it impacts on older people, latest findings show that over 55s have seen an 18 per cent rise in living costs since 2008 - almost 5 per cent more than the general population.
This means that someone aged 55 or over is now, on average, £978 a year worse off than official measures recognise. This increases to over £1,100 in additional annual costs for those aged 65-69.
In the last 12 months alone the cost of living for those aged over 55 has risen by £1173 in absolute terms.
The dramatic increase in costs experienced by those in later life comes at a time when retirement income is under increased pressure. Low interest rates means savings returns have been hit while annuity rates are at an all-time low of £5,600 per £100,000 or 5.6 per cent. Combined with increasing life expectancy, those retiring today will have a smaller pot of cash to sustain them over a longer period of time than those who retired five years ago.
Commenting on the findings, Logan Steele, General Manager, Age Scotland Enterprises said: "At a time when the value of annuities is in free fall and savings generate little or no income, it is extremely worrying that those over 55 have seen the additional annual costs they face increase by six per cent in just one year. The Silver RPI shows that, since 2008, this age group is, on average, nearly £1,000 a year worse off than official measures recognise.
"We have to recognise that as life expectancy increases, and we see more people live into their ‘80s, 90s or to being over 100, action has to be taken to help them plan ahead to protect and maximise their income. Government and the financial services industry must improve the range of financial products available to those in later life, and the information and support available to ensure consumers only ever buy what best meets their needs. Unless this is addressed, there is a real danger that poverty will become the norm for those in the last decades of their lives."
Erik Britton of Fathom Financial Consulting, the former Bank of England inflation specialists which developed the Silver RPI in partnership with Age UK Enterprises, said: "Inflation figures are at record highs but what's clear is that the effects are far worse if you're in later life. With soaring costs of fuel, food and petrol prices, inflation for September was forced up to a record 5.8 per cent. Unless the rate falls, pensioners spending power will be even further reduced."
The Silver RPI shows that those over 55 do not experience cost rises at the same rate. ‘Younger' people in later life aged between 55 and 59 have experienced inflation at 0.11 per cent below Headline RPI since June 2011 in contrast to ‘older' people in later life over the age of 75 who have experienced a larger increase in prices. Those over 75 have experienced additional cost increases at 0.39 per cent above the general population.
Those in later life experience cost rises above the general population for two main reasons. Firstly, they typically carry less mortgage debt therefore have benefited less from the low interest rate environment of the last three years. At the same time, they spend proportionally more on products and services, including food and fuel that have increased significantly in price. Over the period June 2011 to September 2011, utilities prices rose by 10.4 per cent.
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