Pensioner inflation of 36% over the past decade

Pensioners have seen the general price level of the goods and services they purchase rise by 36% in the last ten years; faster than the increase in Retail Price Inflation (32%), according to research from Clerical Medical. This trend is also reflected over the past five years, with pensioners seeing a rise of 20% compared with an 18% increase in Retail Price Inflation.

Rising housing costs have been a key driver behind pensioner inflation in the past decade with a 69% increase. Increases in council tax (89%) and repairs and maintenance (84%) were the key factors behind the rise in housing costs. Housing is the largest single expense facing pensioners, accounting for an average 25% of all expenditure (£63.65 a week). Housing represents a slightly smaller proportion of expenditure for pensioners compared to all households (27%).

Pensioner inflation has picked up markedly in the past two years. The price of goods and services bought by the typical pensioner household increased by 8.8% in the two years to 2008 Quarter 1.

Pensioner inflation was above retail price inflation throughout the period between 2003 Q1 and 2007 Q1 before coming into line, at 4.0%, in 2008 Q1. Over the past five years, pensioner inflation has averaged 0.5 percentage points above retail price inflation (20.3% against 17.8%).

Alcoholic drinks & tobacco (45%) saw the largest increase in inflation among non-housing items over the last ten years. Transport (43%) and food and non-alcoholic drinks (29%) recorded the second and third highest inflation rates respectively. Clothing and footwear (-23%) was the only main category of expenditure where prices have fallen in the last ten years.

Pensioners' Spending Patterns

Average pensioner household expenditure up 24% since 2001/02. Pensioner households' average weekly expenditure has increased from £200.90 in 2001/02 to £249.83 in 2006. The biggest increase in expenditure has been on housing, up 33% from £47.74 in 2001/02 to £63.65 in 2006. Spending on recreation and culture has increased from £40.14 in 2001/02 to £52.45 in 2006 (31%) and spending on transport has increased from £22.32 to £28.35 in 2006 (31%).

Food and non-alcoholic drinks account for the largest proportion of a pensioner's household budget (14%) relative to all households (10%), with pensioners spending an average £35.31 a week on food. Personal goods and services (including health) - also account for a larger proportion of a pensioner's household budget (11%) than for all households (9%), with pensioners spending an average £27.74 a week.

Transport accounts for the smallest proportion of a pensioner's household budget (11%) relative to all households (14%), with pensioners spending £28.35 a week. Recreation and culture also account for a slightly smaller proportion of a pensioner's household budget (21%) than they do for all households (23%), as do housing costs and clothing.

Changes in Spending Patterns 2001/02-2006

Between 2001/02 and 2006 there was only a modest change in spending patterns among pensioners, with all eight categories recording a change of no more than 2% in their share of the average pensioner's budget.

Household goods and services account for a decreasing share of the average pensioner's budget, easing from 12% to 10% between 2001/02 and 2006. However, average spending on household goods and services has still risen from £23.44 a week to £26.07 over the period. Food and non-alcoholic drinks and clothing and footwear also account for a falling share of the pensioner's average budget.

Martin Ellis, chief economist of Clerical Medical, said: "The average cost of living facing pensioners has risen by more than one-third over the past decade. The cost of living for pensioners has increased by more than that for all households during the period, particularly in the last five years.

Higher housing costs have been the key factor behind rising living expenses, accounting for a quarter of the total average weekly expenditure of a typical pensioner household."