Chancellor Rishi Unak did not mention pensioners during his Budget speech last week, which was 8,000 words long.

The over-65s, however, will be most affected by rising food and energy prices. They could soon see their pension income and savings devalued due to soaring inflation.

Analysis reveals that retired couples will be spending an extra £70 a week on essentials next year, compared to 2016.

Retirement finances: The over-65s will be the worst hit by rising energy and food prices, and could soon see their savings and pension income devalued by soaring inflation

Retirement finances: The most vulnerable to rising energy and food costs are the over-65s, who could see their savings and pension income eroded by high inflation.

The Centre for Economic and Business Research (CEBR) says the average retired household of two is set to spend about £57 a week more in 2021 than five years ago. 

The think tank expects costs to rise by a further £670 next year — some £13 a week.

And with state pensions set to increase by just 3.1 per cent, pensioner couples in 2022 could be up to £25 a week worse off than five years ago. Inflation could also affect the spending power for each pound that is paid to pensioners in 2026.

The estimated five million fixed rate annuities don’t rise with the prices each year. It means if (as Government economists predict) inflation rises by a total 12 per cent in the next five years, the annuities will be worth 12 per cent less by 2026, making each £1 paid worth 88p.

Money Mail explains how prices could pinch our pensions…

Pension cuts

One in four retired women have no other income than the state pension, and more than two million state pensioners receive less than £100 a week.

Yet the Government is still planning to drop its triple-lock guarantee for one year to save more than £30 billion over five years. 

One in four retired women have no other income than the state pension, and more than two million state pensioners receive less than £100 a week

One in four retired women have no other income than the state pension, and more than two million state pensioners receive less than £100 a week

The triple-lock pledge increases pension pay each year in line with the highest average earnings, inflation, or 2.5%. It was dropped after the pandemic caused earnings figures to show an 8.3 percent increase.

Instead, the state pension is expected to rise by September’s inflation figure of 3.1 per cent. 



Retirees on the new state pension will miss out on more than £10 a week and those collecting the old state pension will get £8 a week less than they would under the triple lock.

Sir Steve Webb, partner at pension consultancy Lane Clark & Peacock, says: ‘There is no doubt that pensioners face a real squeeze next year. Even if the triple lock is restored in 2023, pensioners will be forced to tighten their belts for the next 18 months.’

Pinch: Up to £2,600 over five years.

Income in danger

According to the Association of British Insurers, there are approximately six million annuities that provide guaranteed annual income for pensioners.

Last year, 41,500 were sold at a fixed rate. Inflation will only affect 7,000.

Tom Selby, head of retirement policy at broker AJ Bell, says five of the six million annuities in place are likely to be fixed — and are now at the mercy of inflation.

He says: ‘Inflation can be a silent destroyer for savers and retirees — particularly those who have locked their hard cash into flat-rate annuities. 

Based on official projections, someone with a flat-rate annuity could see their spending power drop by 12 per cent by the end of 2025 as a result of inflation.’

People with a fixed annuity paying out £20,000 a year will lose £460 in spending power next year alone. 

Mr Selby adds: ‘Anyone planning to buy an annuity should provide any information which could boost their rate, like details of illnesses or lifestyle factors that could limit life expectancy. 

Savings hit: With inflation rising, the value of cash held in poor-paying accounts will be quickly eaten into

Savings are at risk: As inflation rises, cash held in low-paying accounts will quickly be lost.

‘You can buy annuities that have inflation protection baked in, although you will get a lower initial rate as a result.’

Pinch: £2,735.90 over five years on a fixed annuity paying £20,000 a year.

Savings shrink

Low interest rates have been a long-standing feature of easy-access savings accounts for pensioners. With inflation rising, cash held in low-paying accounts will soon be eroded.

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Interest rates paid on savings fell to 0.31 per cent in September — down from 0.46 per cent a year before. It means £50,000 in savings will now return £75 less, says investment service Hargreaves Lansdown.

Figures from AJ Bell show £10,000 sitting in cash will lose £240 in value next year alone.

Mr Selby adds: ‘Anyone with large sums in a cash product should review their portfolio and, at the very least, make sure they are getting the best interest rate.

‘For medium and longer-term savings, those wanting to combat the ravages of inflation may need to consider taking some investment risk with their funds.’

Pinch: £1,367.95 on £10,000 savings over five years.

Prices are high

Aviva reports that the over-65s spend 12 percent of their household income on food while the under-30s spend only 8%.

As with energy, it means that pensioners will be hardest hit by price increases.

Inflation threat: The over-65s spend 12% of their household income on food, compared to 8% for the under-30s

Inflation risk: The over-65s are likely to spend 12% of their household income for food, compared with 8% for those under 30.

The average grocery shop for people aged between 65 and 74 is £61.20 a week, according to the Office for National Statistics. Those aged 75 and over spend around £47.70.

Kantar, a consumer insights firm, recently revealed that food prices have increased 1.7% year over year. However supermarkets have warned that prices could easily rise above 4% by the end of this year.

This means 65 to 74-year-olds could be paying £159 more a year, and those aged 75 and over £125, Hargreaves Lansdown believes.

Pinch: Nearly £800 over five years.

Overpriced costs

Pensioners will be hit harder than the rest by the soaring energy costs.

This is because, according to Aviva, the over-65s spend 6 per cent of their monthly household budget on energy. This compares to 3% for the under-30s.

Hardest hit: Over-65s spend 6% of their monthly household budget on energy compared to around 3% for the under-30s

The most difficult hit: Over-65s consume 6% of their monthly budget on energy, while the average for under-30s is 3%

But the energy bill price cap rose 12 per cent last month and has been tipped to rise a further 30 per cent in the spring.

Should this happen, those aged 65 to 74 would see the portion of their budget spent on energy bills rise from 5 per cent to 7 per cent (an extra £11.45 a week or £595.40 a year).

But the over-75s, would need to spend 10 per cent of their budget on power bills — up from 7 per cent. This means they’d be spending an extra £559.52 a year.

Pinch: Up to £3,000 over five years.

Bill build-up

The over-75s also now have to pay for a £159 annual TV licence.

Council tax is also predicted to rise as much as 3 per cent in some areas — adding £57 to the average bill of £1,898. 

The Office for Budget Responsibility last week warned households face paying about £435 extra in council tax by 2026.

Caroline Abrahams is the Age UK charity director. She says that rising inflation will cause anxiety among many seniors on low incomes. 

She says: ‘Currently £2.2 billion in pensioner benefits are going begging so if you think there’s the slightest chance you may be eligible — now is the time to put in a claim.’

For those in receipt, such as Pension Credit, they can get a TV licence for free.

Pinch: At least £2,000 over next five years.


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