Debt problems loom for pensioners as fuel bills rise

Pensioners are falling into debt as high fuel costs and the recession squeeze their finances.

Higher gas and electricity costs are forcing pensioners to tighten the purse strings, according to research by the Institute of Fiscal Studies (IFS).

The IFS looked at energy expenditure in the years between 2004 and 2007 and found that gas prices rose by 55% and electricity increased by 36% during that time.

According to the study, pensioners responded by reducing their energy consumption, by around 10%.  So pensioners were paying more for their energy, but getting less in return.

Andrew Harrop of Age Concern, who along with Help The Aged commissioned the report, commented “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.”

It is not just high energy costs that are putting retirees finances under pressure.

A new report by Scottish Widows shows that a third of pensioners are now in debt and the levels of debt are increasing.

Pensioners who have non mortgage debt now owe £7,344 on average, compared with £6,732 a year ago.

Their mortgage debt is increasing too – having increased by an average of £8,000.  15% of retirees still have a £50,000 mortgage, on average, yet the value of their homes has fallen during the recession.

Commenting on the report, Ian Naismith, head of pensions market development at Scottish Widows said “The recession has seemingly done nothing to encourage retirees to cut their debt, and with the possibility of the value of their property dwindling, they could be leaving themselves in a vulnerable position.”

“Those in retirement should be able to enjoy life and not worry about the financial burden of debt, as well as their retirement income.”

People nearing retirement are also suffering from debt problems and it might be sensible for them to seek debt advice before their situation worsens.