Millions say monthly living costs have risen by £500
Around 13 million people say their monthly living costs are £250 higher than a year ago, while for 9% (five million) they’ve seen their monthly costs rise by £500 or more.
For six million people, they’re struggling to pay for heating while four million are struggling to pay for food.
According to the LV= Wealth and Wellbeing Monitor, retired people have seen their living costs rise by an average £163 a month, adding £2,000 to annual outgoings.
The representative survey of 4,000 UK adults revealed that to cope with rising living costs, 36% are saving less, 34% are buying cheaper brands, 30% are scaling back on holidays and meals out, while 23% are dipping into savings.
LV= also found Brits are cancelling subscriptions, taking on more credit card debt and loans, are turning to family and friends for support, are paying less into pensions and 5% have also cancelled some insurance policies.
This comes as inflation is soaring, hitting 7% in March, but the research also revealed that one in four adults are unaware how inflation reduces the value of savings. Younger people (18-34) are less likely to understand the corroding effect of inflation on savings than those aged 65 and over.
But for the older generation and retirees on fixed incomes, they face a greater risk when it comes to rising living costs.
LV= said that the rising cost of living may cause those in retirement to withdraw more of their pension savings each year than originally planned.
Savers who draw down a larger income from their pension run the risk of exhausting their pension fund, depending on their pension’s growth rate.
As an example, a £200,000 pension fund could last 28 years if £12,000 a year is withdrawn, or 15 years if £18,000 a year is withdrawn (assuming 4% growth rate).
‘Risk of running out of funds in retirement’
Clive Bolton, managing director of savings and retirement at LV=, said: “The LV= Wealth and Wellbeing Monitor highlights how rising prices are squeezing the incomes of millions of people.
“Inflation fears have been rising since summer and rising prices pose a problem for retired people. Those on fixed incomes will see the purchasing power of their incomes fall. Those drawing an income from their pension fund may be forced to withdraw more money from their pension fund than they anticipated and increase the risk of running out of funds in retirement.
“Rising fuel bills mean many are making cutbacks to other areas of expenditure while many are dipping into savings, taking on extra debt or borrowing from family to make ends meet.”
Bolton added that one of the big issues people now face is how to also protect the future spending power of their savings being eroded by rising prices.
“This is especially true if they keep their money in savings accounts and are reluctant to invest in what have typically higher returning stock-market investments because they fear volatility.
“One solution could be smoothed investment funds that are designed to reduce the volatility of investment markets and produce real returns over the long-term. The best option is to consult a financial adviser who will be able to identify the most suitable funds.”