Pensions lose ground on bills

Over the next fifteen years the cost of bills will grow faster than income from pensions, according to Prudential.

10:34 26 January 2005

Over the next fifteen years the cost of bills will grow faster than income from pensions, according to Prudential.

A Datamonitor report, commissioned by Prudential, has revealed that pensioners' expenses could double by 2020, and pension income will not keep up with this.

Currently pensioners spend one pound of every eight on running their homes. But water, fuel and energy - along with council tax - are set to rise.

The report predicts that bills will rise by five per cent a year until 2010, with pensioners' incomes rising by just four per cent a year.

Ali Crossley, director of lifetime mortgages at Prudential, said: "The cost of running a home in retirement will take up more and more of pensioners' disposable income.

"Today, necessities account for 12.3 per cent of their income. By 2020 it will be 13.5 per cent.

"Pensioners who are feeling the strain already, could find it even more difficult maintain the same standard of living in the future."

Datamonitor's David Parry added: "Most of this increase will be in the next five years ... as current price rises in tax, water and energy all take their toll."

According to gas and electricity watchdog energywatch, bills have increased by nearly 20 per cent for gas and 14 per cent for electricity for in the last year alone.

But methods of unlocking funds for retirement, such as lifetime mortgages, have recently been criticised.

Last week the Financial Services Authority said that the value of homes may be giving people a "false comfort".

"Although property prices have risen strongly in recent years, this will not always be the case; and consumers may overestimate the income that property will provide, as well as the costs and difficulties associated with releasing their capital," the FSA said.