Inflation 'swindles almost everybody' says Warren Buffett
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The cost of living crisis has stepped up another gear with Consumer Prices Index (CPI) inflation soaring again in the year to April 2022, figures published today show. Levels like this have not been observed since 1982, and many are worried about their finances.
It presents particularly concerning news for retired individuals, many of whom were hoping to enjoy life after work without struggles.
Becky O’Connor, Head of Pensions and Savings at interactive investor, has warned the latest announcement is likely to be “panic inducing” for older and vulnerable people.
She said: “Even today’s pensioners may barely remember the last time inflation was this high – 1982 was the year of the Falklands War.
“Proposals by the Government to offer warm home top-ups might take the edge off, but come winter, the household finances of the most vulnerable will still be in the deep freeze.”
It is the energy price rises which are most worrying, Ms O’Connor has warned, with many people on a fixed income set to feel the pinch.
Individuals on low and fixed incomes, including millions of pensioners, will now have to shoulder significant increases in their household bills.
Many over 66s are dependent on the state pension – with the full new sum worth £9,627 a year, and the full basic sum worth £7,376.
As a result, this could present major financial challenges in the months to come – especially in the winter.
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Ms O’Connor continued: “A typical energy bill of £2,000 takes up 20 percent of state pension income for people on the new state pension and 27 percent of basic state pension income.
“Those who don’t receive a full state pension will be paying an even higher proportion of income on energy.
“In normal times, no more than 10 percent of income would be considered a reasonable amount to spend on energy. Many just won’t be able to pay.”
Steven Cameron, Pensions Director at Aegon, also warned pensioners are particularly “vulnerable” at this time.
With the state pension only increasing by 3.1 percent, it is being vastly outpaced by inflation, meaning purchasing power is rapidly falling.
He added: “Those hoping to supplement retirement incomes from interest on cash savings face even greater challenges.
“A savings account paying at the base rate level of one percent is losing eight percent in real terms with inflation at nine percent.”
Mr Cameron added many pensioners will be facing a “long, cold winter” due to spiralling energy bills.
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Ms O’Connor suggested low income pensioners look into Pension Credit, designed to help provide a valuable financial boost.
The Department for Work and Pensions (DWP) payment can be worth £3,300 a year according to the latest data.
Eligibility can be checked online, and a claim is designed to be a simple process.
Britons will need the following information to hand:
- National Insurance number
- Information about any income, savings and investments a person has
- Information about income, savings and investments on the date a person wants to backdate their application to.
Some individuals may also wish to seek guidance from organisations such as Age UK or Citizens Advice to help them.
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