Pensioners must seek alternative income sources

Friday, 17 April 2009 06:12

Low interest rates are forcing pensioners to depending on savings to supplement their state pension to seek income elsewhere.

The UK's more than eight million pensioners have seen their monthly income fall by almost 25 per cent over 12 months, SHIP (Safe Home Income Plans), the industry body for equity release, has found.

Andrea Rozario, director general of SHIP said: "Many pensioners have saved their whole lives with the expectation that they can use income from this capital and the state pension to fund a comfortable retirement."

With 80 per cent of UK pensioners relying on savings or share-based investment income to help fund day-to-day living expenses, according to the National Pensioners Convention, the base rate changes have had a drastic effect on pensioners' income.

"Thousands of pensioners are now contemplating how they will survive without up to a third of their income," Ms Rozario said.

In April 2008, the average pensioner received a monthly return of £158 from their savings if they used an easy access base rate tracker account. These funds were added to a monthly state pension of about £393.

Since April 2008, pensioners have seen their savings income decline to just £16 per month, and state pension increases have not been enough to correct the discrepancy.

Jon King, managing director at Hodge Lifetime said: "The recession continues to stretch people's finances and older homeowners have been some of the worst affected by rising costs of living and reducing returns from savings.

"Equity release can offer a real solution for older homeowners."

Ms Rozario agreed that equity release could be the best solution for retirees looking to boost their income, if they are aware of the option.

"We urge the government to work with us in promoting [equity release] as a very real alternative for pensioners who are suffering as a result of the credit crisis," she said.

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