INFLATION TAKES 3.5% BITE OUT OF PENSIONER INCOME
- Prices are rising slower for over-65s but fixed incomes mean they suffer more, warns Key Retirement Solutions
Rising prices are taking a 3.55%* bite out of pensioner income with pensioner couples suffering more than single OAPs, analysis from leading independent equity release adviser Key Retirement Solutions.
Inflation for pensioner households is well below the 5.4% RPIX inflation measure which excludes mortgage costs – but Key Retirement Solutions says inflation is a bigger threat to pensioners as they cannot rely on wage rises to bail them out.
The April rise in the Basics State Pension of 2.5% and the ongoing squeeze on interest rates which means most savings accounts pay negative returns after inflation are piling the pressure on pensioners, Key Retirement Solutions says.
Key Retirement Solutions analysis shows that inflation for single pensioners is currently 3% a year while for pensioner couples it is 4.1% producing an average of 3.55%.
Based on those figures the recent 2.5% rise in the State Pension to £97.65 for a single pensioner and £156.15 for a couple means they’ve suffered a pay cut.
Dean Mirfin, Group Director of Key Retirement Solutions, said: “Inflation is reckoned to be a price worth paying in the short-term so that the economy recovers but pensioners are suffering more than most.
“The Liberal Conservative Coalition plan to restore the average earnings link for the State Pension is welcome but it won’t take effect until next year. In the meantime the over-65s are seeing the value of savings cut and other retirement income being eroded by rising prices.
“Prices are not rising for the over-65s as much as for the rest of the population but the rest of us can at least hope for pay rises. The good news for pensioners is that house prices are recovering steadily and many of them are literally sitting on huge investments.”
Retired homeowners have total property wealth owned outright of up to £765.18 billion, Key Retirement Solutions research shows.
The group’s Equity Release Market Monitor for Q1 2010 shows up to £216.9 million of housing wealth was released through equity release schemes compared with £183.1 million in the same period of 2009 – a rise of 18.46%.
Total sales of plans climbed 19% to an estimated 5,600 in the three months up from 4,703 in 2009 with drawdown plans – which enable customers to take cash when it is needed rather than in a lump sum – making up 68% of sales compared with 57% last year. The average amount of cash released in the three months was £43,090 compared with £44,948 in 2009
The Market Monitor shows 23% of over-65s releasing equity during the three months used some of the cash to pay off debt – down from 33% in 2009 – while 17% used it to pay off an existing mortgage compared with 23% in 2009.
The full Market Report including regional analysis can be downloaded at Key Retirement Solutions’ website www.keyrs.co.uk/press-releases/market-monitor-q1-2010/. Anyone looking to release equity from their home can also request an independent guide to equity release by calling 0800 531 6010 or by visiting https://www.keyrs.co.uk/free-guide.
Notes to Editors
* KRS analysis of ONS data based on
Case studies are available both regionally and also are available dependent on the use of the funds released.
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About Key Retirement Solutions
Founded in 1998 Key Retirement Solutions is the leading independent adviser specialising in equity release. Key Retirement Solutions is a limited company registered in England No 2457440 with its Head Office at Key Retirement Solutions, Harbour House, Portway, Preston, Lancashire, PR2 2PR.Key Retirement Solutions is authorised and regulated by the Financial Services Authority.
