What the Government give, the Bank of England take away!

Depending on how you read it, pensioners are about to get a boost to their income with the UK state pension increasing on the 06 April by £7.25 per week for couples and £4.55 per week for single pensioners. This is the biggest increase in both percentage and cash terms since 2001, when the basic state pension was increased by £5 a week following criticism of the previous year’s measly increase of 75p.
I have no doubt that the increase will be welcomed by the majority of pensioners, many of whom are estimated to be struggling with personal inflation levels of 9.2% for a single male pensioner, 9.1% for a single female pensioner and 7.7% for retired couples. However in real terms they will not have extra cash to spend.
The average pensioner has around £10,000 in savings, upon which they rely on interest to supplement income. Even if we keep the maths simple and compare 5% base rate to the current 0.5% base rate, those savers have seen their income reduce from £9.60 per week to just 96 pence. So in real terms the increase in pension does not even get back to square one.
Let us hope that today’s report by Nationwide of house price increases of 0.9% in March signal some hope of recovery for the wider economy. That way we can get back to fair interest rates for borrowers and savers alike.
More stability of house prices will bring back lender and consumer confidence and may allow more pensioners to take advantage of equity release mortgages to enhance their standard of living.