Article date: 31 May 2006
A brand new Retirement Index, released today, commissioned byNorwich Union, reveals the share of income that pensionerhouseholds spend on bills reached a 10-year record high in 2005.Pensioner households now spend nearly a quarter (22.7%) of theirdisposable income on bills.
The Norwich Union Retirement Index has been compiled by the Centrefor Economics and Business Research (cebr), one of the UK’sleading economics consultancies and commentators on trends in theUK and global economy. The index tracks changes inpensioners’ incomes and household spending.
The costs of fuel, water, electricity and gas rose in total bynearly £100 last year. This is double the increase in 2004 and fourtimes the rises seen in 2003 and 2002. Overall, pensioner householdbills climbed by 7.4% in 2005 – four times the rate ofinflation as measured by the government’s consumer priceindex (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 fuelcosts which together increased by nearly £20
- Council tax and domestic rates increased by £29
Daren Carter, director of sales and marketing for Norwich UnionPersonal Finance, said: “Norwich Union commissioned thisindex to look at the challenges faced by retired people, and to seehow pensioners’ disposable income is changing. Retirement isoften regarded as a time when pensioners should be enjoying theirlife but rising household bills mean that many on fixed incomes arestruggling to makes ends meet.
“The Institute of Actuaries calculates that the aggregatehousing wealth for people aged over 65 is £1,100 billion. It makessense for people to consider how property might be used to fundretirement.”
Dominic Walley, managing economist of cebr, said: “WhenNorwich Union asked us to compile the Retirement Index, we lookedat the data back as far as 1995 and found that last year was theworst. Rises in household bills have affected everyone, butpensioners have been hit hardest. Pensioners are suffering from acombination 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 thegovernment has tried to help them in successive budgets, theygenerally do not have large equity-based savings and have notbenefited as much from the stock market recovery over the pastthree years.”
Summary of Norwich UnionRetirement Index
This table shows how pensioner householdincomes and essential spending has changed since 2000. Over thepast five years spending on essential bills has increased as aproportion of income. The far right column shows what share ofincome can be spent on non-essential items using 2001 as abenchmark.
Pensioner’s annual householdspending
Annual income of pensionerhouseholds
(2001 = 100)
For Norwich Union press office, contact:
David Gwyer01904 452828 07800 699508
Louise Soulsby 01904 452617
For cebr, please contact:
Dominic Walley 0207324 2841
Thushani Gajasinghe 020 7324 2865
Jonathan Said 020 7324 2840
Notes to editors:
The Norwich Union Retirement Index is a report onchanges in pensioners’ income and household spending compiledfor the first time by cebr. The analysis is based on governmentdata from the Expenditure and Food Survey and draws on cebr andNorwich Union’s experience analysing the pensioner market.The Norwich Union Retirement Index analyses pensioner’sincome from different sources, tax payments and the money theyspend on household bills. The index tracks the share of disposableincome that pensioners have left over after they have paid theirhousehold 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 withparticular strengths in macroeconomic and market forecasting. Thereport has been co-authored by cebr staff (for details seebelow).
About Norwich Union
Norwich Union is oneof the UK's biggest life insurers. It is a leading provider oflife, pensions and investment products and one of the largestfinancial adviser (FA) providers. FAs provide over 70% of thecompany's long-term savings business in the UK.
Norwich Union has strategic alliances with building societies andother leading UK brand names including CIS and The Royal Bank ofScotland Group. Norwich Union’s news releases and a selectionof images are available from Aviva's internet press centre atwww.aviva.com/media