Published today, the new report, The inflation experience of older households, shows that recent high inflation – driven by soaring food and energy prices – has affected pensioners more than non-pensioners, with the oldest and poorest hit hardest. The report says that the official inflation rate, published by the ONS, does not always reflect the reality facing many households, particularly pensioner households which tend to spend a much higher proportion of their income on food and energy.

Age Concern is calling on the Government to take the real rate of inflation for pensioners into account when uprating the Basic State Pension and Pension Credit, and introduce an emergency package of measures to help the most vulnerable pensioners through the difficult months ahead.

Key IFS research findings:

 

• In 2008, inflation in both food and fuel prices meant all pensioner age groups had significantly higher average inflation than non-pensioners, though the oldest pensioners suffered more.
• In August 2008, average pensioner inflation reached 7.4%, significantly higher than the 5.4% rate for non-pensioners and the highest rate for pensioners since 1991. In the same month, the youngest, richest pensioners had an average inflation rate of 6.1% compared to 9% for the oldest, poorest pensioners.
• Pensioner households are not homogeneous. There are sometimes significant differences in the average inflation for different pensioner groups at any one time.
• Between 1991 and 2008, the average inflation for pensioners and non-pensioners has been broadly the same (3.2% and 3.1% respectively). However the inflation rate for older pensioners has been marginally higher (3.4% for people aged 80+).
• In most years since 1987, the increase in the Basic State Pension has been broadly similar to pensioner inflation (3). However, since 2006 the real value of the Basic State Pension has been falling. In 2007 and 2008, even the guarantee element of the Pension Credit, uprated each year in line with average earnings (4) has not been sufficient to compensate pensioners for their inflation.

Age Concern is warning that such high inflation rates for pensioners, especially the very oldest and poorest, mean that many pensioners feel forced to cut back on essential items such as food, heating and clothes.

Gordon Lishman, Director General of Age Concern, said:
“It’s clear that the most vulnerable pensioners are bearing the brunt of the huge increases in the cost of living seen recently. Exceptional times call for exceptional measures, and the Government must urgently respond to the needs of the millions of pensioners struggling to pay for the basics. An emergency package is needed to help those who cannot afford to wait for the good times to return.”

Age Concern’s recommendations to the Government 

• Increases to the Basic State Pension and Pension Credit should never fall below the real pensioner inflation rate. Next year (April 2009), the Basic State Pension should be increased in line with pensioner inflation instead of the ONS inflation rate, and Pension Credit should be increased in line with low-income pensioner inflation or average earnings, whichever is higher.
• Given low benefit take-up rates and exceptional increases in pensioner inflation rates, the Government should mount a high-profile campaign to improve take-up of benefits this winter and make an emergency payment of at least £100 to all pensioners entitled to benefits.
• Automatic payment of benefits such as Pension Credit should be introduced as quickly as possible.
• A clear government strategy is urgently needed to ensure that all pensioners are receiving the advice and claiming the money benefits they are entitled to.  

For a copy of IFS’s research report or press release, please contact Helen in the Age Concern press office on tel: 020 8765 7514 or email: helen.spinney@ace.org.uk or Emma/ Bonnie in the IFS press office on 020 7291 4800 or email: emma_h@ifs.org.uk.