The cost of living is rising six times faster than pensions, according to Norwich Union's latest Retirement Index. The Retirement Index tracks how retirement comfort changes over time by measuring the income that pensioners have left after paying household bills.
The index found that between January and June 2006, the average pensioners' household income rose by just 0.6 per cent, compared to essential expenditure, which rose by 3.8per cent – more than six times as much. This massive hike in the cost of living means that pensioners are being forced to cut down on non-essentials and luxuries as they struggle to cover the costs of daily life.
Dominic Walley, managing economist of cebr, said: “When Norwich Union asked us to compile the Retirement Index, we looked at the data as far back as 1995 and found that 2005 was the worst year for pensioner comfort. Rises in household bills have affected everyone, but pensioners have been hit hardest. And poorer pensioners have it the worst."
Although pensioners' incomes have increased over the past 10 years – by 31 per cent since 1995 – household bills have risen by even more – 58per cent, leaving pensioners with less and less to spend on items other than food, clothes and bills.
Between August 2005 and August 2006, the cost of fuel rose by nine per cent, electricity by 27 per cent, and gas by a shocking 39 per cent, all of which has added £14 to the average pensioner's monthly spend. Annually, gas bills are up by £55, electricity, by £41, water charges have increased by £20, council tax and domestic rates have seen an increase of £27 on average, and pensioners are spending nearly £20 extra, per year, on central heating repairs, house maintenance, fuel costs.
Brendan Kearns, product development manager at Norwich Union Personal Finance, says that for some pensioners, using the value in their homes could be the answer: “Retirement is often regarded as a time when pensioners should be enjoying their life but rising household bills mean that many on fixed incomes are struggling. Average house prices rose on average by 194% between Q3 1995 and Q3 2006 so it makes sense for people to consider how they might unlock some of the value in their home. That could be achieved by moving to a smaller home or using an equity release plan.”
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