While it has been announced that the Retail Price Index (RPI) – a measure of inflation – was at zero per cent in February, some analysts argue that pensioners are facing much higher rates of inflation.
The cost of many goods has come down, such as fashion and electrical items, but the goods on which retirees spend the majority of their income – food and energy bills – are higher than this time last year, which means they are facing higher inflation than the average consumer.
As Nigel Hare-Scott, from Home & Capital equity release explains, "Inflation as measured by the RPI may be down, but this will come as little comfort to many elderly homeowners who are financially crippled by huge utility bills and rising council tax demands."
The CPI (Consumer Price Index) has unexpectedly risen over the same period, as a result of the rising costs of food and energy, but the Government uses the RPI to set state pension and benefit rates, leaving a void between income and expenses for the vulnerable.
"Older and poorer households are facing much higher average inflation rates than younger and richer ones," the Institute of Fiscal Studies explains, "as the former have tended to suffer most from continued high annual inflation in food and domestic energy costs, while the latter have tended to benefit most from cuts in mortgage rates and falling motor fuel bills."
Research from Alliance Trusts has shown that far from facing the official CPI inflation rate of 3.2 per cent, those aged 75 or older face inflation of 4.9 per cent – 53 per cent above average.
For those retirees who are finding it difficult to make ends meet as falling interest rates eat into their savings and fixed incomes, Mr Hare-Scott suggests that they consider releasing some of the cash locked up in their homes.
"With savings incomes at an all time low and state pensions probably frozen, raising cash via a personally tailored equity release plan has become the most obvious way for people to maintain a reasonable lifestyle in retirement," he said.
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