Prudential reports pensioners set to lose £2.9 billion of spending power over next 12 months
Prudential has revealed that pensioners’ cost of living is rising nearly 50 per cent faster than the current rate of Inflation.
Prudential has reported that pensioners in the UK with additional savings held in cash ISAs, savings accounts and current accounts could see their spending power fall by an average of £278 each in the next 12 months, according to new analysis. The calculations show that the combined effects of increased inflation and low interest rates will erode pensioner buying power by a total of £2.9 billion in the coming year.
Pensioners are seeing their cost of living rise 44 per cent faster than the current rate of inflation. This is because a greater proportion of their income is spent on goods and services with prices that are rising ahead of inflation, like fuel and food.
The average pensioner has £19,664 in additional savings, but is likely to see their purchasing power fall considerably as the gap between the interest rates paid on savings and the rate of Silver RPI eats into the value of cash nest eggs in real terms.
According to recent research by Age UK, the average annual inflation recorded by the Retail Prices Index (RPI) has been 3.1 per cent in the period since January 2008. Silver RPI over the same period has averaged 4.6 per cent - resulting in an annual rate of inflation for pensioners that is nearly 50 per cent higher.
Vince Smith Hughes, Head of Business Development at Prudential, said: "Low interest rates and rising Silver RPI mean that many pensioners are particularly feeling the squeeze, and for those who rely on interest paying savings accounts to top up their income the challenge is even greater.
"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.
“We strongly encourage people to speak to a financial adviser to ensure they are making the best use of income-generating investments, bonds and pension funds where relevant, in order to ensure their income has the potential to rise and combat increasing inflation and living costs.”
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Notes to Editors:
Pensioner inflation figures based on data from ’Age UK Enterprises Silver RPI - Measuring the true impact of inflation on those in later life’ – 11 May 2011.
’Prudential’ is a trading name of The Prudential Assurance Company Limited, which is registered in England and Wales. This name is also used by other companies within the Prudential Group, which between them provide a range of financial products including money advice, life assurance, bond investment, a tax calculator and retirement plans, which includes pensions and pension service.
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