Energy costs are predicted to consume 8 per cent of pensioners over 75’s available income this fiscal year, compared to 5 per cent for those under 50, according to a new report.
According to a report published by The Resolution Foundation on how the cost-of-living problem is affecting different generations, people over the age of 65 receive £500 less in government assistance than people between the ages of 40 and 65.
The impact of benefit and tax increases, however, is greater on these younger age groups. In contrast to a fifth of 65- to 74-year-olds, more than two-thirds of 20 to 29-year-olds had savings of less than one month’s salary. Over 50 per cent of the wealth in Britain is owned by the baby boomer generation and just 8 per cent of the population are millennials.
Hargreaves Lansdown senior pensions and retirement analyst Helen Morrissey says: “This report lays bare the carnage wreaked by the pandemic and cost-of-living crisis on people’s finances. Different generations are affected by different aspects, but no one has emerged unscathed. We see how older pensioner households are much more affected by energy price rises – spending on average 8 per cent of their disposable income on heating their homes which tend to be larger and much less energy efficient. However, their financial resilience means they are a group best able to deal with these costs.
“Older generations have been hit by inflation and have been less supported by the measures brought in by government to deal with the cost-of-living, but on balance their incomes have been supported by longer-term measures such as the pension triple lock which has helped boost the income of pensioners since its introduction.
“Changes to working age benefits since 2010 mean pensioners are on average £666 better off while non-pensioners are £816 worse off. Under the triple lock, pensioners are in line for a block-busting 10.1 per cent increase in their state pension for next year – though this is somewhat up in the air as the Chancellor puts together an Autumn Statement designed to plug a huge black hole in the public finances – the triple lock could be a casualty.
“The finances of younger generations look incredibly fragile as soaring inflation has caused a sharp decline in their real income. They are more likely to be paying for their energy by pre-payment meters and they are also less likely to be able to meet an expected cost from their own money. Support from friends and family is incredibly important in helping this group make ends meet and they are far more likely to have to resort to using things like their overdraft to meet their costs.
“It is a grim picture that shows no sign of getting better any time soon. As recession looms on the horizon, working-age people face the prospect of increased job losses and wages that don’t keep up with rising costs. Pensioners will see their pension asset values depressed by lower growth and their money will not go as far as it once did. Around four in ten adults said they didn’t think they would be able to save anything over the next 12 months and everyone’s real incomes will have fallen by the end of the Parliament.
“It’s a deteriorating picture backed up by the findings of HL’s Savings and Resilience barometer. According to its latest findings in July, around 62 per cent of people had enough savings to be seen as financially resilient – this tends to be around three months’ worth of essential expenses. However, by next year this could fall to 57 per cent with people on lower incomes, renters and single people particularly badly affected.”