'Saga Generation' suffers as credit crunch squeezes pensions

27 May 2008 / by Rachael Stiles
The demographic dubbed as the 'Saga Generation' is feeling the effects of the credit crisis, with even those at the top end of the scale feeling the squeeze.

The over-50s, which are commonly spoken of with reference to Saga – which specialises in life insurance and travel insurance for the older generation – are finding that the golden years of the final salary pension and increases in the value of their homes are over.

A survey by the Daily Telegraph has found that nearly six out of 10 pensioners said they feel worse off than they did a year ago; 32 per cent said that they cannot afford to heat their homes sufficiently as a result of increasing gas and electricity prices. Just one per cent said that they are better off than they were 12 months ago.

Some pension experts have been surprised by the effect the global credit crisis has had on wealthier retirees; they believed that those who had already entered retirement had adequate pensions and high value homes without mortgages with which to build a solid financial position.

Experts have, instead, been putting more of an emphasis on how people currently in their 30s and 40s should prepare for the fact that they will not enjoy a retirement as comfortable as their parents' generation.

Mervyn Kohler, head of public affairs at Help the Aged, said that this could indicate "the beginning of the end of this particular era, which has been a golden one for many pensioners."

Most companies have ceased to offer final salary pension schemes, replacing them with defined benefit schemes which commonly offer far lower pension payments. According to Government figures, the average single pensioner now has an annual income, from pensions and savings, of just £178 a week, or £9,256 a year.

This figure marks a two per cent increase on last year, but heating bills alone have increased by 15 per cent during the same time period, and inflation has pushed up the cost of other essentials such as food.

Retirement is only going to get worse for each generation, according to Malcolm Cuthbert, head of financial planning at stockbrokers Killik & Co. "The saving habit has died out to be replaced with a spend-today-and-don't-let's-worry-about-tomorrow attitude." he said.

Tom McPhail, a pensions expert at Hargreaves Lansdown, was equally pessimistic about the outlook for pensioners. "I think the golden generation for pensioners is already over" he lamented. "We've gone past the high water marks and it's going to get worse from here."

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