Pensioner inflation rises above 20 per cent since Northern Rock rescue
Pensions Minister gives little comfort on Government’s plans for pension uprating
Many commentators have welcomed the small dip in October inflation figures (from cpi of 5.2% last month, to 5% this time) but such high inflation figures continue to cause alarm among pensioners. They are looking to the Government to help with this assault on their purchasing power, but, as part of an exclusive interview with Saga Director-General, Dr Ros Altmann, Pensions Minister Steve Webb could not offer any reassurance that state pensions would be increased in line with the traditional September inflation figure. It is all up to the Chancellor whose decision will be announced on 29th November.
The Minister did confirm that pensions would be uprated in line with a cpi inflation measure (and not just earnings) but left open the question of whether the Chancellor may choose to use an alternative figure, such as average annual inflation over time, rather than the normal September number. Saga calculations show that using an average inflation figure from October 2010 to September 2011 would mean a 4.2% rise, rather than 5.2%, or using a 6 month average from April 2011-September 2011 would mean a 4.6% increase. These are both on the cpi measure. Using rpi, the average increase for 12 months ending September 2011 would be 5.1% and for the 6 months it would be 5.2%. And, using the September rpi inflation figure, the uprating would have been around 6%.
Ros Altmann, Saga Director General said: “We are deeply concerned that the Government may fail to give pensioners the full inflation increase they need in these tough times.”
Pensioners remain worst hit by inflation and have witnessed a cumulative inflation rate of over 20% since the start of the credit crunch, when Northern Rock failed. Figures compiled for Saga by respected research house Cebr show that, compared with four years ago (September 2007 – October 2011), the cost of living has risen for different age bands as follows:
On rpi measure: On cpi measure:
• 50-64: 18.5% 50-64: 16.4%
• 65-74: 20.1% 65-74: 16.0%
• 75 and over: 20.3% 75 and over: 16.7%
• Whole population: 14.4% Whole population: 15.5%
Saga created these Saga Price Indices* to focus on people over 50 because inflation rates naturally differ across age groups with different spending patterns. The latest figures show that inflation on both the RPI and CPI measures are significantly higher for over 50s compared with the UK as a whole.
Annual consumer price index (CPI) inflation in October was 5.0% down from 5.2% in September, breakdown for the over 50s in October was as follows:
• 50-64: 5.1% (5.4% in September)
• 65-74: 4.9% (5.2% in September)
• 75 and over: 5.2% (5.4% in September)
RPI Annual retail price index (RPI) inflation was 5.4% in October, down from 5.6% in September. Saga calculated that annual retail price index (RPI) for the over 50s in October was as follows:
• 50-64: 6.3% (6.6% in September)
• 65-74: 6.2% (6.4% in September)
• 75 and over: 6.4% (6.5% in September)
Commenting on the Saga Price Indices Dr Ros Altmann said: “Another set of horrifying inflation figures, and once again, the over 50s hardest hit by soaring prices.
“In only four years inflation for the over 50s has wiped out over 20% of their money and pensioners have no way of protecting themselves against this loss. For those dependent on the state pension, whose uprating has already been lowered from rpi to cpi, and the many pensioners living on fixed incomes from annuities, it is vital that the Government does not water the inflation protection down any further by failing to use the traditional September inflation figure.
“The current stance of policy, with low rates and high inflation, is silently stealing pensioners’ purchasing power. This will damage the economy and cause more pensioners to struggle to pay their basic bills. We want to see policy makers put older people higher up the agenda. We cannot afford for the country’s pensioners to be overlooked.”