‘I’m dreading the rising energy costs’: Households are facing a squeeze on their finances, so here are some tricks for pensioners to beat the bills surge
Millions of households are facing a painful squeeze to their finances as inflation soars to 5.4 per cent, rising interest rates push up the cost of borrowing and annual energy bills surge by hundreds of pounds.
Older households in particular are being besieged by rising costs. Former Pensions Minister Baroness Altmann explains: ‘Pensioners, especially those who are less well off, spend a much larger proportion of their incomes on the basic essentials of life, such as food, heating, fuel and household bills. Unfortunately, it is these basic costs that have risen so fast.’
There is no easy answer to beating the financial squeeze. Millions of households face a tough few months – or longer. But there are a number of steps that older households can take to loosen its grip a little.
Concerns: Linda Douglas has cut car use to save money on fuel
I’m dreading the rising costs
Linda Douglas, 68, has seen her energy bills shoot up and is dreading them rising further still in April when the price cap increases.
‘I’m at home a lot during the day and put on layer upon layer to keep warm,’ she says. ‘I keep the heating on at just 17 degrees and turn it off two hours before I go to bed to keep costs down.’
However, Linda, from West Yorkshire, says she is lucky that she is fit and healthy and able to enjoy activities that don’t cost a lot of money. ‘I want to keep my car to hold on to my independence, but I walk most of the time. I go on group walks as well, which is a great way to make friends and only costs £1.
In fact, fuel costs are now so astronomical I’m scared to take the car out of the garage most of the time.’ Linda saves money by batch-cooking meals, which she freezes. ‘One 250g margarine container is a perfect one-person portion size,’ she says.
Claim all you’re owed
Sarah Coles, at wealth platform Hargreaves Lansdown, advises anyone who is struggling to make sure they are receiving all the help to which they are entitled. ‘Once you have done the sensible cost-cutting of shopping around and trading down food and drink for cheaper brands, it’s difficult to know where to go next,’ she says.
‘If your finances are pushed to breaking point, make sure you’re getting all the help you can before you consider difficult sacrifices.’
Pensioners on the lowest incomes may be entitled to pension credit, effectively a top up to the state pension that ensures no one has an income below £177.10 a week, or £270.30 for couples. Around a million pensioners who are eligible currently miss out because they do not claim – it is not given to you automatically.
Pension credit is the gateway to other benefits. These include a free TV licence if you are aged 75 or older, help with NHS dental treatment and spectacles, and assistance with rental or mortgage costs. You may also receive the Warm Homes Discount – a £140 payment towards your electricity bill – and payments towards your bills if the weather turns very cold.
Invest some savings
In theory, increases to the Bank of England’s base rate should be good news for retirees as they are more likely to be savers than borrowers. However, in reality, banks have a poor track record of passing on increases to their customers.
The Mail on Sunday has been campaigning for providers to Give Savers A Rate Rise, but so far only a handful have since the first base rate increase in December. It is unlikely many will do the right thing following last week’s rate rise either. So, older households who rely or plan to rely on their savings for an income may want to consider investing some of their savings.
It only makes sense to invest cash that you will not need for a good five to ten years and to only take on a level of risk you feel comfortable with. However, some older households may feel it is worth taking a little risk rather than accept the guaranteed drop in the value of their money if left in a savings account.
Les Cameron, retirement expert at M&G Wealth, explains: ‘For those in retirement, money needs to work harder to keep its value. If you thought you could retire on savings of £100,000 but prices go up by ten per cent before you retire, you’ll need to save an additional £10,000 to have the retirement you had imagined. To achieve this, you may have to save more – but with rising costs this can be really challenging. Take some investment risk if you have a lot of cash-based savings, or consider delaying your retirement.’
Protect your income
If you’re in or reaching retirement and thinking about buying an annuity to get a guaranteed income for life, you may want to consider your options. Some annuities come with inflation protection, which costs more but ensures that your income keeps up with the cost of living.
Steven Cameron, pensions director at Aegon says: ‘Inflation has been low for so long, people may have questioned whether it was worth paying more for it,’ he says. ‘While inflation protection is expensive, savers may now wonder whether they can afford not to have it.’