Inflation to hit pensions prediction

Pensioners are facing the prospect of having to cope with a seven per cent rate of inflation during 2008, according to a new report.

Figures compiled by Newcastle Building Society Equity Release Service show that the rate of inflation experienced by the elderly is significantly higher than the four per cent level of the Retail Prices Index.

The main contributory factors to this are food and energy prices, which the Office for National Statistics estimates make up a third of pensioners' expenditure.

Food costs increased by 12 per cent last year and look set to keep rising, while three major gas and electricity suppliers have implemented sizeable price rises in recent weeks.

Newcastle Building Society's Bob Mottershead said the figures paint a "bleak picture" and predicted some pensioners would struggle financially in the coming months.

"For the many relying on the basic state pension of just £87.30 per week, these increases could negatively impact everyday quality of life," said Mr Mottershead.

The warning comes just weeks after a study by Alliance Trust found that working people in their sixties viewed inflation as the biggest threat to them being able to have a comfortable retirement, ahead of illness and a stock market crash.