The £60 bonus for pensioners which was announced in the Chancellor's pre-Budget Report will not be sufficient to compensate for the level of inflation hitting retirees on a state pension, according to SHIP (Safe Home Income Plans).
Inflation is eroding more than £180 from the value of state pensions in 2008/2009, the firm has said, meaning that the £60 bonus planned for January to help those who are facing pension poverty will not be enough to bridge the gap.
SHIP believes that equity release
offers an alternative for poor pensioners who have value locked in their homes, boosting their pension
income and significantly improving their standard of living.
A single retired person's current income from a state pension
equates to £4,716.40 a year, but the current level of inflation at 8.7 per cent for pensioners means that this is depleted in value to £4,338.91 – a difference of £372.49 and, in real terms when uniform inflation is taken into account, a £186.25 black hole in their income.
Last week the Government announced plans to increase the state pension by five per cent from April, but SHIP does not believe that this is sufficient to alleviate the financial difficulties faced by today's pensioners.
For many people, the solution is equity release, it says. It can provide an additional £900 a month, or £10,800 a year, for a single 75 year old female who owns a £300,000 property – a 229 per cent income boost, compared to the state pension.
"The Government has offered too little, too late to pensioners in this year's pre budget report." said Andrea Rozario, director general of SHIP. "A £60 bonus paid in January barely covers a third of what will have been eroded from their pensions over the tax year by inflation. The additional £4.55 a week for single pensioners is almost an insult and much more needs to be done to help the 2.1million pensioners living in poverty.
Ms Rozario concluded: "One solution for those pensioners needing to boost their income is equity release. The over 60's can release some of the wealth tied up in their property and increase their retirement income substantially should they wish. We urge the Government to work with us in promoting this as a very real alternative to poverty for pensioners."
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