40-year high for inflation of 9% is ‘panic-inducing’ for the old and vulnerable
18th May 2022 07:43
by Rebecca O'Connor from interactive investor
interactive investor's head of pensions and savings considers the impact on pensioners.
The UK rate of CPI inflation hit 9% in April, which is the highest since current records began and the highest since 1982, according to new estimates by the Office for National Statistics.
The rise was mostly driven by higher energy prices. The ONS said energy prices rose by 46.5% on the month, with electricity up 40.5% and gas 66.8%, as the Ofgem price cap was increased.
Becky O’Connor, Head of Pensions and Savings, interactive investor, said: “Even today’s pensioners may barely remember the last time inflation was this high – 1982 was the year of the Falklands War.
“The increase in costs to households of basic energy is a huge shock to the system. Proposals by the government to offer warm home top-ups might take the edge off, but come winter, the household finances of the most vulnerable will still be in the deep freeze.
Impact on pensioners
“Energy price rises are panic-inducing. It is asking the impossible to expect people on low, fixed incomes, including the UK’s more than 11 million pensioners, to shoulder such increases. A high proportion of the UK’s 66 and over population are dependent on the state pension alone. The full new state pension is £9,627 a year and the basic state pension is £7,376.
“A typical energy bill of £2,000 takes up 20% of state pension income for people on the new state pension and 27% of basic state pension income. Those who don’t receive a full state pension will be paying an even higher proportion of income on energy. In normal times, no more than 10% of income would be considered a reasonable amount to spend on energy. Many just won’t be able to pay.
“Making full use of all discounts, as well as Pension Credit for those who are eligible, is now an absolute must. You may be eligible for additional support from your local authority and it is worth checking. It will be very hard to get through the next few months without help, so don’t delay. Age UK and Citizens Advice may also be able to help you identify the best sources of support for your circumstances.”
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