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.
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 £31
- Electricity bills increased by £25
- Water charges increased by £21
- Central heating repairs, house maintenance and other fuel costs which together increased by nearly £20
- Council tax and domestic rates increased by £29.
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 £1,100 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.”
| 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 | £2,455 | £12,366 | 99.5 |
| 2001 | £2,471 | £12,754 | 100.0 |
| 2002 | £2,495 | £13,091 | 100.3 |
| 2003 | £2,584 | £13,366 | 99.8 |
| 2004 | £2,771 | £13,804 | 98.9 |
| 2005 | £2,976 | £14,429 | 98.2 |
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.
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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:
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