Pensioners losing most of their income from savings

For many pensioners having their life savings in a higher interest savings account has become an effective way to boost their pensions with additional income over recent years, with many enjoying a substantial boost to their pensions because of the monthly income they earned from the interest on their savings.

However, the recent spate of base rate cuts has seen many savings accounts paying little to nothing by way of interest, which has resulted in the income that these pensioners were earning from the interest being slashed by up to 90 percent in some cases.

The equity release company, SHIP, has recently revealed just how badly many pensioners are being affected by the drop in income resulting from interest rate cuts. Just twelve months ago someone with £38,000 in savings could earn monthly interest of around £158 based on a 5 percent interest rate by way of return. However, this has now dropped to earnings of just £16 a month based on the same amount and on current interest rates.

An official from SHIP said: ‘Many pensioners have saved their whole lives with the expectation that they can use income from this capital and the state pension to fund a comfortable retirement. However, with the unprecedented movements of the UK base rate, thousands of pensioners are now contemplating how they will survive.’

Another industry official said: ‘Equity release can provide retirees with financial freedom in retirement but it’s not always the right option for everyone. We firmly believe no-one should commit to any form of equity release without seeking independent specialist advice.’

A number of charities working for the elderly have also recently expressed concern over how pensioners are losing a large chunk of their income on savings, and are having to cut back on essential purchases such as food.

Tags: food, recent years, chunk, pensioners, Pension, current interest rates, savings