Pensioner spending power to fall by £2.9bn - Prudential

Wednesday, 17 August 2011 10:16

Low interest rates and high inflation will cut pensioners' spending power by £2.9 billion over the next 12 months, it has been claimed.

According to a new report from Prudential, the cost of living for retired individuals is rising nearly 50 per cent faster than the current rate of inflation, which will result in an average dip of £278 each in the next year.

This is because retirees spend a greater proportion of their income on goods and services with prices that are rising ahead of inflation, such as fuel and food, the firm stated.

It went on to point out that the average pensioner has £19,664 stashed away, but is likely to see their purchasing power fall markedly as the gap between the interest paid on deposits and the rate of inflation eats into the value of their savings.

Vince Smith Hughes, head of business development at Prudential, said: "As most people in Britain feel the financial pressure of rising living costs, pensioners on fixed retirement incomes are facing even higher levels of inflation and are suffering disproportionately."

Saga has also released figures showing that people in their fifties are being harder hit by inflation than the rest of the country.

Director-general Dr Ros Altmann remarked: "They are supporting a huge burden, many with elderly relatives to support as well as their children and grandchildren. The government must take note of the pressures the baby boomers are suffering. Anyone on fixed incomes will really be in trouble."

Meanwhile, the Consumer Credit Counselling Service (CCCS) says pensioners' finances are being hit by a 'double squeeze' of rising prices and high debt servicing costs.

Delroy Corinaldi, external affairs director at CCCS, described the findings as "alarming", adding: "I am concerned that an increasing number are at risk of falling into serious debt."

Use the Myfinances.co.uk comparison tables to find the best deal on a pension

• Tags:
• inflation
,
• interest rates
,
• news
,
• pension
,
• pensioners
,
• purchasing