Our view
May 06 - UK: Retirement gets tougher as pensioners' bills rise
A brand new Retirement Index, released today, commissioned by
Norwich Union, reveals the share of income that pensioner
households spend on bills reached a 10-year record high in 2005.
Pensioner households now spend nearly a quarter (22.7%) of their
disposable income on bills.
The Norwich Union Retirement Index has been compiled by the Centre
for Economics and Business Research (cebr), one of the UK’s
leading economics consultancies and commentators on trends in the
UK and global economy. The index tracks changes in
pensioners’ incomes and household spending.
The costs of fuel, water, electricity and gas rose in total by
nearly Ł100 last year. This is double the increase in 2004 and four
times the rises seen in 2003 and 2002. Overall, pensioner household
bills climbed by 7.4% in 2005 – four times the rate of
inflation as measured by the government’s consumer price
index (1.8% in March 2006).
The biggest increases in 2005 for pensioner households were:
- Gas bills increased by Ł31
- Electricity bills increased by Ł25
- Water charges increased by Ł21
- Central heating repairs, house maintenance and other fuel costs which together increased by nearly Ł20
- Council tax and domestic rates increased by Ł29
Daren Carter, director of sales and marketing for Norwich Union
Personal Finance, said: “Norwich Union commissioned this
index to look at the challenges faced by retired people, and to see
how pensioners’ disposable income is changing. Retirement is
often regarded as a time when pensioners should be enjoying their
life but rising household bills mean that many on fixed incomes are
struggling to makes ends meet.
“The Institute of Actuaries calculates that the aggregate
housing wealth for people aged over 65 is Ł1,100 billion. It makes
sense for people to consider how property might be used to fund
retirement.”
Dominic Walley, managing economist of cebr, said: “When
Norwich Union asked us to compile the Retirement Index, we looked
at the data back as far as 1995 and found that last year was the
worst. Rises in household bills have affected everyone, but
pensioners have been hit hardest. Pensioners are suffering from a
combination of council tax rises, energy and water price rises.
Although investments and pensions have performed well this year,
household bills have spiralled.
“And poorer pensioners have it the worst. Even though the
government has tried to help them in successive budgets, they
generally do not have large equity-based savings and have not
benefited as much from the stock market recovery over the past
three years.”
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Summary of Norwich Union Retirement Index This table shows how pensioner household incomes and essential spending has changed since 2000. Over the past five years spending on essential bills has increased as a proportion of income. The far right column shows what share of income can be spent on non-essential items using 2001 as a benchmark. |
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|
|
Pensioner’s annual household spending |
Annual income of pensioner households |
Retirement index (2001 = 100) |
|
2000 |
Ł2,455 |
Ł12,366 |
99.5 |
|
2001 |
Ł2,471 |
Ł12,754 |
100.0 |
|
2002 |
Ł2,495 |
Ł13,091 |
100.3 |
|
2003 |
Ł2,584 |
Ł13,366 |
99.8 |
|
2004 |
Ł2,771 |
Ł13,804 |
98.9 |
|
2005 |
Ł2,976 |
Ł14,429 |
98.2 |
-end-
For Norwich Union press office, contact:
David Gwyer
01904 452828 07800 699508
Louise Soulsby 01904 452617
For cebr, please contact:
Dominic Walley 020
7324 2841
Thushani Gajasinghe 020 7324 2865
Jonathan Said 020 7324 2840
Notes to editors:
The Norwich Union Retirement Index is a report on
changes in pensioners’ income and household spending compiled
for the first time by cebr. The analysis is based on government
data from the Expenditure and Food Survey and draws on cebr and
Norwich Union’s experience analysing the pensioner market.
The Norwich Union Retirement Index analyses pensioner’s
income from different sources, tax payments and the money they
spend on household bills. The index tracks the share of disposable
income that pensioners have left over after they have paid their
household bills.
The report is available to journalists in the "Under embargo"
section of cebr’s website at http://www.cebr.com/newsroom.html. The
password is "fred".
cebr is a leading independent commercial economics consultancy with
particular strengths in macroeconomic and market forecasting. The
report has been co-authored by cebr staff (for details see
below).
About Norwich Union
Norwich Union is one
of the UK's biggest life insurers. It is a leading provider of
life, pensions and investment products and one of the largest
financial adviser (FA) providers. FAs provide over 70% of the
company's long-term savings business in the UK.
Norwich Union has strategic alliances with building societies and
other leading UK brand names including CIS and The Royal Bank of
Scotland Group. Norwich Union’s news releases and a selection
of images are available from Aviva's internet press centre at
www.aviva.com/media