Living costs for pensioners soar by 33% since 2000
Total expenditure of the UK's 10.6 million retirees equals £96 billion a year - this means on average a retired couple spends £17,922 a year and a single retiree spends £9,917 a year - or £190.70 a week, according to new research. With the average pensioner in the UK receiving state pension income of £102.15 a week, retirees are spending up to £88.55 a week (or 87%) more than the average state pension.
The biggest dent to a pensioner's overall wallet is from food and non-alcoholic drinks, costing £1,411 annually and equating to 14% of their annual spend. The second biggest emphasis of spending is on recreation and culture - single pensioners are spending an average of £1,337 a year.
Bills, bills, bills
Pensioners are burning up a tenth (9%) of their annual spend on utilities such as fuel, water supply and electricity - they now spend £918 a year, compared with £635 in 2000. Furthermore, although senior citizens receive discounted travel, the cost of transport and motoring costs (including petrol and vehicle maintenance) add up to an average annual bill of £1,217.
Cost of goods on the rise
The cost of living has increased significantly since 2000. The biggest percentage rise on the cost of goods for pensioners has been on alcoholic drinks and tobacco which has increased by 57%. Food and non-alcoholic drinks comes second with a 45% hike.
Matt Trott, LV= Head of Annuities said: "Low interest rates and rising inflation has hit pensioners hard with the cost of living dramatically rising since 2000, resulting in pensioners having to significantly increase what they spend. Food, drink and bills take up a large chunk of the weekly budget, however, it's good to see that people are able to enjoy themselves in retirement too."
London pensioners spend the most
Given costs of living in the capital, it is no surprise that pensioners in London spend the most - 11% more than the average single pensioner in the UK. The average weekly spend for a couple in London adds up to £407, with single retirees spending £241. The East of England follows closely behind with a weekly spend of £395 for a couple and £225 for single pensioner households. The North East ranks lowest - couple's spend £306 while a single pensioner spends £175 a week.
Making the most of retirement savings
With the cost of living for retirees rising it is essential that people make the most out of their pension savings as they approach retirement. There are a number of ways in which people can increase the income that they receive in retirement, including an enhanced annuity, which can provide an income of around 20% more than a standard annuity if the person has certain lifestyle factors or suffers from certain common illnesses. The income received can be increased even more significantly if people have serious conditions. With inflation eating into the spending power of those in retirement pensioners can also link their annuity to inflation so that their income would track the cost of goods if they continue to rise.
Matt Trott continued: "Being a retiree in the UK doesn't come cheap and people approaching retirement need to look at their retirement income options early, to ensure they get the most out of their savings to maintain a good quality of life in retirement. There are a variety of options available, including annuities, pension drawdown and releasing equity from a property. For many people an annuity will be the most appropriate choice, but this is a big decision, as you can't change your mind or get your money back once you've signed on the dotted line.
"Making the right decision about an annuity can affect the income you receive for the rest of your life, so it's important not to just accept the first offer you receive from your pension provider, and instead talk through the many different options available with an expert first."
LV= has launched a website to give consumers information about the value of enhanced annuities at enhancedretirement.co.uk.