Over 55s 'significantly poorer' than a year ago after raiding savings pot for £4,000 each
The situation hasn't been helped by miserable rates on savings accounts, particularly fixed-rate bonds, which are used by many pensioners to provide a solid ultra-low-risk income in retirement.
The average one-year bond pays just 2.77 per cent, according to Moneyfacts.co.uk. Even the longer-term deals don't match up with inflation; the average five-year bond pays 4.08 per cent and the best just 4.7 per cent.
Retirees with incomes of £10,000 or more from their pensions still pay tax. After basic rate tax is deducted, the a 4.7 per cent bond, from Clydesdale and Yorkshire banks, slips to just 3.76 per cent.
Those just hitting retirement also face a harrowing drop in the value of their pension pots when converted into cash.
The rates on annuities, which pay a regular income stream from a pension, have crashed to new record lows. A £100,000 pension pot now buys around £5,300 a year, according to The Better Retirement Group. That marks nearly a 10 per cent fall in just six months. In June £100,000 bought nearer £6,000.
According to charity Age UK, over 55s have experienced price rises almost 2 per cent a year above the official RPI measure, which hit 5.4 per cent in November.
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