Pensioners income is being gradually reduced by inflation

Inflation is currently at 5.2% which is the same level as in September 2008.  This will hit retired people who have taken out a level annuity pension the hardest.  This type of pension is at a fixed level, which means that it does not rise with the current level of inflation and therefore effectively reduces in value over time.

This is accelerated due to the fact that older people tend to spend a larger proportion of their available income on commodities that are increasing in price at a greater level to the CPI, such as energy and food.

The real effect of inflation for those aged over 75 over the last four years has in fact been 20.2%, compared with 14.4% for the whole population.

Standard Life have recently conducted some research into level annuity pensions.  They have projected that a 65-year old man who retired in 1981 with a fixed payout of £10,000 a year can now expect a fall in the value of his pension payout, equivocation to £3,207 a year (a £6793 drop in value over 20 years).  A 65-year old man with a similar pension pot of £10,000 who retired in 1991 now has a purchasing power of £5,658 (£4,342 drop in value over 10 years).

Homeowners aged over 55 years who are concerned about the purchasing power of their pensions and would like to know how much money the value of their property could release to increase their income, can find out by contacting therightequityrelease.co.uk for equity release advice.