Pensioners pay more money for less heat

New research adds to the evidence that some pensioners are turning down the heating or staying in bed to save on fuel bills. This is despite having to spend more money on energy as a result of huge increases in gas and electricity prices since 2004.

A major new report by the Institute for Fiscal Studies (IFS) reveals that despite having increased spending on fuel by almost one third between 2004/5 and 2006/7 to meet higher bills, poorer pensioners have, nevertheless, reduced their fuel consumption by seven per cent. Further price increases during 2008, after the period covered by this study, will have added to the pressure, forcing poorer older people to turn down the heating or cut spending in other areas.

The report, commissioned by Age Concern and Help the Aged, which looks at pensioner spending patterns across many different categories, reveals a picture of pensioner have's and have not's who experience hugely contrasting lifestyles during retirement. For example, in 2007, the poorest fifth of pensioners needed to spend nearly 40 per cent of their budget (after housing costs) on food and fuel, while the richest fifth spent just under 20 per cent.

Holidays are a major area of spending for the richest group of pensioners accounting for £1 in every £8 of their budget, making this the biggest single item in their shopping basket. In contrast, poorer pensioners spent a mere £1 in every £30 on holidays and their largest budget items were electricity (6.5% of spending) and then meat (6.2%) out of the 56 categories that were analysed.

The report also compares pensioners spending patterns with non-pensioner groups over time. Some findings include:

Despite high spending on holidays, in 2007 even the richest pensioners still spent less of their budget on certain luxury items compared to younger people. For example, the poorest under 35s spent more of their budget on eating out (7.8%) compared to the richest over 70s (5.7%).

Older people continue to financially support others, for example through cash gifts and presents to younger family and friends and charity donations. This type of payment was the 10th largest item on the shopping list for those aged 80 plus, compared to 25th for households under-35.

Younger pensioners spend as much as households aged under-35 on average and by 2007 pensioners in the richest 40 per cent of households were spending as much as non-pensioners in the same income group.

Andrew Harrop, Head of Public Policy at Age Concern and Help the Aged said: "What's most clear from this important new research is the significant differences in living standards between older people at different ends of the income scale. Shockingly, the report finds that while poorer pensioners are spending more of their available income on energy, they are - at the same time - reducing the amount of energy they buy. Not only does this demonstrate the problem of soaring energy costs in recent times, but is a warning to policy makers and others that vulnerable older people could be putting their health at risk in winter just to cut costs.