If people were in any doubt about what the cost of living crisis looks like, I suspect those doubts will have been dispelled by the utility bill letters dropping through letter and in-boxes in recent weeks.
April marks a gruesome time in terms of energy bill rises, with the price cap going up, and with it the monthly costs of using gas and electricity. If you’ve not experienced this yourself yet then pop onto social media and you’ll see how monthly direct debits are more than doubling for most people – a scary prospect and one that is likely to get worse before it gets better.
For those on fixed incomes in particular, such as the retired, this is an incredibly worrying time and, as has been pointed out by others far more qualified than me, the government ‘support’ offered doesn’t really cut the mustard. While the Spring Statement did provide an opportunity to provide support in this area, the focus was instead on cutting fuel duties and providing green incentives.
While these are welcome, they will not particularly address this challenge and when you can only access a certain amount of money each month, you’re going to have to weigh up how you take from Peter to pay Paul.
Of course, every one of us is impacted, but the number of retired individuals facing the prospect of just how they fund the increase in their energy bills is growing. Recent statistics from the Office for National Statistics (ONS) have revealed a big increase in the number of over-50s who have effectively been forced to retire as a result of the pandemic.
According to the ONS, a quarter of a million people aged between 50 to 70 left work or lost their jobs over the last couple of years and have not gone back to paid work since. 77% aged between 50 and 60 say they left work earlier than they expected; while the figure was 57% for those aged between 60 and 70.
This enforced retirement is interesting for all manner of reasons, not least because we have over one million job vacancies in this country currently, and while some of those who retired don’t want to return to work, you suspect there are large swathes who do but are potentially being overlooked for these roles.
This is a bigger debate around ageism but it would be very worrying to hear that those in later life, who wanted to work, are not able to secure these roles because it was felt they were now ‘too old to work’.
However, back to the newly-enforced retired, and it’s absolutely clear that 2022 is going to be the toughest year for fixed-income retirees that we have potentially ever seen. The facts are simple – money is going to have to stretch much further than it has ever done before – we are, of course, not just talking about energy bill rises, but food, clothing, transport, etc, costs are all going up.
Currently inflation levels – on the government’s preferred measure I might add – are at 6.2% with the anticipation they will move to 8-10% pretty sharpish. Last week, as a result, the Bank of England raised interest rates to 0.75%, and effectively said that its previous peak inflation estimate of 7.25% for 2022 was wishful thinking and it would be “several percentage points” higher than that.
So, where does that leave these retirees, and where does it leave the later life market? You will undoubtedly have heard me talk, in previous years, about my disgust that we’ve had some pensioners feeling they can’t heat their own homes, or choosing heating over eating, while those self-same homes could be used and utilised to help people through such periods.
The number of pensioners who are currently feeling that way is likely to have risen significantly, and yet again, over the last two years in particular, we have seen double-digit house price growth giving property values that offer further equity that could be accessed.
Later life lending, particularly drawdown products which would allow clients to take what they need now with the potential to take more in the future only if required, could undoubtedly be a big solution for these retired homeowners. And this is a message that we as an advice profession should be getting out there – why sit in a home worth hundreds of thousands of pounds feeling unable to pay your monthly bills, when you have such options available?
We are hopeful that inflation, etc, will start to track back down next year, but in the meantime, many older homeowners are going to face a harsh reality. Our sector has however the options available to help and support them through this period but, as a start, we need to make them aware of it, to get them comfortable with the option and responsibilities, and to hold their hands through the process. The sooner we start, the more peace of mind we can provide.
Stuart Wilson is CEO at Air Group