Silver RPI shows soaring cost of living: Age UK

One year since Age UK Enterprises first published the Silver RPI, the latest findings by the commercial services arm of charity Age UK show people aged 55 or over are now on average £978 a year worse off than official measures recognise.

The research also found that in the past 12 months, the cost of living for those aged over 55 has risen by £1173 in absolute terms.

Gordon Morris, managing director of Age UK Enterprises, said: “At a time when the value of annuities is in free fall and savings generate little or no income, it is extremely worrying that those over 55 have seen the additional annual costs they face increase by 6 per cent in just one year.

“The Silver RPI shows that, since 2008, an average over 55 is nearly £1000 a year worse off than official measures recognise.

“We have to recognise that as life expectancy increases, and we see more people live into their 80s, 90s or even over 100, action has to be taken to help them plan ahead to protect and maximise their income.”

He said the government and the financial services industry needed to improve the range of financial products available to those in later life, and to ensure information and support available to consumers was suited to their needs.

Mr Morris added that unless the issue was addressed there was a real danger that poverty will become the norm for those in the last decades of their lives.

Retirement income is coming under increased pressure. Low interest rates means savings returns have been hit, while annuity rates are at an all-time low of £5600 per £100,000, or 5.6 per cent. Combined with increasing life expectancy, those retiring today will have a smaller pot of cash to sustain them for a longer period of time than those who retired five years ago.

Erik Britton, director of London-based Fathom Financial Consulting, said: “Inflation figures are at record highs but what is clear is that the effects are far worse if you are in later life. With soaring costs of fuel, food and petrol, inflation for September was forced up to a record 5.8 per cent. Unless the rate falls, pensioners’ spending power will be even further reduced.”

Colin Rodger, director of Glasgow-based Alexander Sloan Financial Planning, said: “The situation is worse because interest on savings accounts has declined so much.

“Because cash rates are so low, clients are moving more of their assets into equity and bond funds. On the whole they seem more tolerant of capital volatility provided they can generate a higher income from the funds.”