Source : Age UK
Published on 14 November 2011 02:30 PM
On the one year anniversary of the Silver RPI, published by Age UK Enterprises, the commercial services arm of charity Age UK, latest findings show that over 55s have seen an 18% rise in living costs since 2008 – almost 5% more than the general population. This means that someone aged 55 or over is now, on average, £978 a year worse off than official measures recognise. This increases to over £1,100 in additional annual costs for those aged 65-69.
In the last 12 months alone the cost of living for those aged over 55 has risen by £1173 in absolute terms.
The dramatic increase in costs experienced by those in later life comes at a time when retirement income is under increased pressure. Low interest rates means savings returns have been hit while annuity rates are at an all-time low of £5,600 per £100,000 or 5.6%. Combined with increasing life expectancy, those retiring today will have a smaller pot of cash to sustain them over a longer period of time than those who retired five years ago.
Commenting on the findings, Gordon Morris, Managing Director, 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 six per cent in just one year. The Silver RPI shows that, since 2008, this age group is, on average, nearly £1,000 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 to being over 100, action has to be taken to help them plan ahead to protect and maximise their income. Government and the financial services industry must improve the range of financial products available to those in later life, and the information and support available to ensure consumers only ever buy what best meets their needs. Unless this is addressed, there is a real danger that poverty will become the norm for those in the last decades of their lives.'
Erik Britton, Fathom Financial Consulting said: 'Inflation figures are at record highs but what’s clear is that the effects are far worse if you’re in later life. With soaring costs of fuel, food and petrol prices, inflation for September was forced up to a record 5.8 %. Unless the rate falls, pensioners spending power will be even further reduced.'
The Silver RPI shows that those over 55 do not experience cost rises at the same rate. ‘Younger’ people in later life aged between 55 and 59 have experienced inflation at 0.11% below Headline RPI since June 2011 in contrast to ‘older’ people in later life over the age of 75 who have experienced a larger increase in prices. Those over 75 have experienced additional cost increases at 0.39% above the general population.
Those in later life experience cost rises above the general population for two main reasons. Firstly, they typically carry less mortgage debt therefore have benefited less from the low interest rate environment of the last three years. At the same time, they spend proportionally more on products and services, including food and fuel that have increased significantly in price. Over the period June 2011 to September 2011, utilities prices rose by 10.4%.
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[1/2 The additional costs faced by older consumers is derived by first calculating the difference between the inflation rates experienced by each Silver RPI age band, and the inflation rate experienced by the population as a whole. This difference is then multiplied by average weekly expenditure on the RPI basket by each Silver RPI age band in the base period. Finally, this figure is multiplied by 52 to given an annual equivalent amount. Over the twelve months to September 2011, Headline RPI inflation was 5.6% (ONS: October 2011)
About the Silver RPI
The Silver RPI was developed by Age UK Enterprises in partnership with former Bank of England inflation specialists, Fathom Consulting, and is the most complete measure of cost increases in later life. It uses information from the Living Costs and Food Survey (LCF) to re-weight the 78 items that make up the official RPI and better reflect the expenditure patterns of over 55s. The measure is the first to consider inflation at five year age bands above 55 years of age and unlike existing ONS pensioner measures it includes all housing costs and households at all income bands. The Silver RPI was first launched in November 2010 and is updated quarterly, with the methodology adjusted for the February report to include more up to date information on expenditure patterns. To reflect this, the weight attached to utility bills was increased, and consequently an increased estimate of the total price rises experienced by those in later life since January 2008.
The actual change in expenditure is based on RPI weights that are updated every February by the ONS. This shows how different age groups have varied their expenditure on different items over the past 12 months.
About Erik Britton, Director, Fathom Consulting
Erik Britton joined Fathom as a director in October 2007. He has 18 years of experience as a professional economist and was formerly a director at Oxford Economics. Prior to Oxford Economics, Erik was involved in economic modelling and forecasting, first at a London-based consultancy called MMD, and then at the Bank of England. At the Bank of England, Erik spent five years in the Monetary Analysis Division where he ran the Bank's UK macroeconomic model, co-ordinated its international forecast, and also managed a team of economists responsible for analysing the economics of the corporate sector.
About Fathom Consulting
Fathom Consulting is an independent consultancy which combines macroeconomic analysis together with financial market research. Fathom’s team of economists combines a high degree of technical expertise with many years of practical experience in policy-making and financial institutions. Their combined experience of analysing both the global economy, the UK and the Bank of England in particular, is unrivalled by any other private sector institution in the UK.
For media enquiries relating to Wales, Scotland and Northern Ireland please contact the appropriate national office: Age Scotland on 0131 668 8055, Age Cymru on 029 2043 1562 and Age NI on 028 9024 5729.
Age UK is the new force combining Age Concern and Help the Aged, dedicated to improving later life.
We provide free information, advice and support to over five million people; commercial products and services to over one million customers; and research and campaign on the issues that matter to people in later life. Our work focuses on five key areas: money matters, health and well being, home and care, work and training and leisure and lifestyle. We work with our national partners, Age Scotland, Age Cymru and Age NI (together the Age UK Family), our local Age UK partners in England and local Age Concerns. We also work internationally for people in later life as a member of the DEC and with our sister charity Help Age International.
Age UK is a charitable company limited by guarantee and registered in England (registered charity number 1128267 and company number 6825798). Age Concern England and Help the Aged (both registered charities), and their trading and other associated companies merged on the 1st April 2009. Together they have formed the Age UK Group (“we”). Charitable services are offered through Age UK and commercial products are offered by the Charity’s trading companies, which donate their net profits to Age UK (the Charity).
Age UK Enterprises
To fund its charitable activities, Age UK needs a constant flow of independent income. It seeks to achieve this through a balance of traditional fund raising and trading activities.
The trading activities, through Age UK Enterprises enable it to meet the needs of older people, through products specifically designed to meet these needs; quality products such as general insurance and energy Services. Age UK Enterprises is the commercial services arm of Age UK.
Age UK Enterprises incorporates: Age UK Energy, Age UK Insurance Services and Age UK Guaranteed Funeral Plans. Log on to www.ageuk.org.uk/products for details.
Age UK Motor Insurance is now proudly on Which? Magazine’s Recommended Providers List of car insurers. Which? Magazine analyse the whole UK car insurance market to find out which brands offer the best policies. Instead of picking Best Buys based on specific scenarios (that are only relevant in specific cases), the experts at Which? magazine focus on the quality of policies.
Age UK Enterprises is part of the Social Enterprise Coalition; an organisation that represents a wide range of social enterprises with the overarching aim of working in partnership for the creation of effective sector products, services and knowledge-sharing networks to help stimulate and encourage growth, development and sustainability of social enterprises in England.
Age UK Enterprises scooped up the ‘Customer Care Award’ at the prestigious 2010 British Insurance Awards. The judges singled out Age UK Enterprises for its exceptional customer service which is provided by Ageas Insurance Ltd, as well as for glowing customer testimonials with a ‘world-class’ customer satisfaction score of 85 per cent, and 89 per cent of customers saying that they would recommend Age UK Enterprises/Ageas (Insurance UK).
Age UK Enterprises Limited is authorised and regulated by the Financial Services Authority for insurance mediation (311438) and to introduce potential annuity customers. Age UK Enterprises Limited is registered in England and Wales No. 3156159, registered office: Astral House, 1268 London Road, London SW16 4ER. VAT Number: 710 3843 66. Age UK Enterprises Limited is a wholly owned subsidiary of Age UK (registered charity No. 1128267 and registered company No. 06825798) and donates its net profits to Age UK.
Age UK England (charity number 261794) has merged with Help the Aged (charity number 272786) to form Age UK, a charitable company limited by guarantee and registered in England: registered office address 207–221 Pentonville Road, London, N1 9UZ, company number 6825798, registered charity number 1128267.
Age UK Enterprises is based at Tavis House,1-6 Tavistock Square, London WC1H 9NA.
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Caroline Abrahams is Age UK’s Charity Director, and has worked predominantly on children and family issues throughout her career.
She was Director of Policy and Strategy at the children’s charity Action for Children and Chair of the End Child Poverty campaign before joining the Local Government Association.
She then moved on to become Senior Policy Adviser in the Department for Children, Schools and Families and more recently she has been an adviser to the Shadow Chancellor, Ed Balls.
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He has a Visiting Professorship in Ageing at Loughborough University.
Jane Vass is Head of Public Policy at Age UK. She joined Age Concern England as Financial Services Policy Adviser in 2006.
She was previously an independent consumer consultant and writer specialising in financial services from the consumer viewpoint.
In this capacity she undertook research such as reports for the National Consumer Council on equity release and on savings and investments for low-income consumers.
She was a member of the Financial Services Consumer Panel from 1999 to 2003, and from 1983 to 1993 she worked for Consumers’ Association.
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