The cost of living for people aged 65 and over is rising faster than the national average, warns Prudential.
An analysis of household expenditure between 2002 and 2006 reveals that on average, annual expenditure in households where the main occupant is aged 65–74 has increased by around 9% compared to a 4% national average. The increase is 10% for households where the main occupant is aged 75 and over.
The average household spends 10% of its annual income on food and non-alcoholic drink, compared to 15% for households where the main occupants are aged 75 and over, and 13% for those aged 65-74. Pensioner income is only growing by around 3% a year despite this.
The average cost of living for pensioner households where the occupants are aged 65 – 74 would rise by more than £12,000 from £21,611 if household expenditure figures rise at the same rate.
Annual expenditure would rise by £8,633 or 62% to £22,553 for households where the main occupants are older than 74 over the same period. The average home would seen an increase of 24% to £41,385.
Gary Shaughnessy, managing director, Prudential Retail Life & Pensions, says: “When compared to the average home, older households see a greater share of their expenditure go on housing costs, fuel and household goods and services, and in recent years these have seen some of the highest increases in costs, which helps explain why retired people are seeing a higher rate than the average in their annual expenditure. This, coupled with the fact that life expectancy has increased, is putting much greater pressure on income in retirement.”
In the 12 months to May 2007 the consumer prices index (CPI) increased by 2.5%. However, the price for fish rose by 12.7% while the cost of vegetables rose by 9.6%. The price for milk, cheese and eggs rose by 6.8%.
Rising house prices have boosted retired people’s income, which accounts for about 50% of wealth for people aged 65 and over, according to a report by HM Revenue and Customs.
Cash is the second biggest asset allocation for the age group at 17%, followed by securities at 16%.
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