The increased rate of VAT, which comes into effect tomorrow (January 1st), will see the over-50s pay an extra £524 million in 2010, insurer RIAS has claimed.
Chancellor Alistair Darling announced earlier this month that the rate will return to 17.5 per cent in the new year after being reduced to 15 per cent in a bid to encourage spending in the UK.
According to RIAS, the over-50s are some of the UK’s biggest consumers, outspending the younger generations by almost 13 per cent each week, equivalent to £21, with the majority of their £179 expenditure going to food, drink, eating out, entertainment and hobbies.
The RIAS research also revealed that the over-50s will be spending £19 a week in VAT next year, compared with £18.52 per week in 2009.
Janet Connor, Managing Director at RIAS, said: "While the 2.5 per cent increase in VAT may not sound like a huge amount, over a year it really does add up and bolsters the already substantial contribution the over-50s make to the UK public purse."
The increase in VAT could see more people struggling to save for their retirement.
In turn, this could lead to an increase in the popularity of alternative funding schemes such as equity release programmes which allow homeowners to supplement their pensions with cash drawn from the value of their properties.
