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Last Updated: Saturday, 29 April 2006, 13:27 GMT 14:27 UK
Cost of living soars for over 75s
An elderly man sits in front of a gas heater
The number of people in "fuel poverty" has been going up

Recent rises in the price of gas and electricity mean inflation is rising far faster for pensioners than it is for younger people, research has found.

Older people are spending more of their income on things that are rising in price and far less on items younger people buy like clothes and electronics which are getting cheaper.

Hyman Wolanski, head of pensions at Alliance Trusts which carried out the research, told BBC Radio 4's Money Box the rate of increase is about 50% more than for younger people.

The group believes this renders the headline inflation rate meaningless for the elderly and needs to be built into the pensions debate.

Mr Wolanski said over 75s appear to be hit the hardest and the older a person is, the worse the problem becomes.

If you are spending a significant proportion of your income in those areas, that is going to hurt
Hyman Wolanski, Alliance Trusts

"Elderly people have a much higher proportion of their income spent on gas, and electricity, and those have gone up by 15% in the last year.

"Now that is a massive increase and if you are spending a significant proportion of your income in those areas, that is going to hurt," he told the programme.

The state pension has risen ahead of inflation - up 2.7% this month - and Pension Credit goes up with earnings, up 4.2% this month.

But Mr Wolanski said that if pensions are going up just in line with normal inflation, then they are not keeping up with price rises for elderly people.

"This is why there is a big problem for them," he said.

"The government to a degree recognises this with the Winter Fuel Allowance. That is targeted at the pensioners and recognises the impact of the extra costs to hit them."

'Frightening'

Mervyn Kohler of Help the Aged was not surprised by the findings.

Mervyn Kohler, Help The Aged
The totality of the picture is pretty bleak
Mervyn Kohler, Help The Aged
"We have known this for a long time," he told the programme. "The amount of their small incomes which pensioners do have to pay on basic essentials is really quite frightening."

About half the basic state pension is needed to cover things like council tax, fuel bills, water charges, "before you even start to begin to live."

"Over the last few years, the numbers in fuel poverty have doubled instead of going down. We have a statutory target to end fuel poverty by 2010," he said.

Households which spend more than 10% of their income on heating and power are deemed to be in fuel poverty.

He accepted that the government had done a "significant amount" but said the net result is still the same:

"The totality of the picture is pretty bleak. Something like 20% of our older population is living below the poverty line, and [there are] no set of targets or milestones on how that is going to be reduced."

Mr Kohler is talking to MPs in the coming week and was clear about his message to them:

"We have got to see the basic state pension which has been allowed to wither away over the years restored to a decent level, particularly for people over the age of 75."

BBC Radio 4's Money Box was broadcast on Saturday 29 April, 2006 at 1204 BST, and was repeated on Sunday, 30 April, at 2102 BST.



BBC NEWS: VIDEO AND AUDIO
Hyman Wolanski of Alliance Trusts on its findings


Mervyn Kohler of Help The Aged on pensioner poverty



SEE ALSO:
Pension plans '90 to 95% agreed'
04 Apr 06 |  UK Politics
Council tax bills to rise by 4.5%
27 Mar 06 |  UK Politics
Fuel poverty to increase in 2006
30 Jan 06 |  Business
High gas price risks fuel poverty
13 Dec 05 |  Business
Q&A: Basic state pension
06 Apr 06 |  Business
Q&A: Pension Credit
06 Apr 06 |  Business


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