Ros Altmann: It’s time to show some financial fairness to the forgotten over-50s

OLDER people have been pushed into a corner. Living costs are rocketing through the roof, unemployment is rising and low interest rates continue to batter the over-50s’ hard-earned savings.

Are they expected just to sit, wait and suffer? Since the start of the credit crisis four years ago, the cost of living has risen particularly alarmingly for people over 50.

Saga’s statistics, calculated by the respected Centre for Economics and Business Research, reveal that the inflation rate for over-65s has actually been an astonishing 19 per cent since 2007, well above the 13.9 per cent increase for the rest of the population in the same period.

Hide Ad
Hide Ad

While many younger people have benefited from falling mortgage interest payments as the Bank of England cut interest rates during the recession, older age groups who have spent a generation (or two) saving, have suffered.

And the inflation problems seem to be getting worse nearly every month.

In August, the national retail price index rose by 5.2 per cent, but Saga’s price index calculations show that people aged 50-64 faced a massive 5.8 per cent rise – nearly triple the Bank of England’s two per cent target.

Meanwhile, those aged 65-74 saw inflation increase in August to 5.5 per cent and for those over-75 inflation is now at its highest level since February 2009. Those living on fixed incomes or annuities have lost nearly a fifth of their buying power in just four years.

Hide Ad
Hide Ad

These sky-high inflation rates for older people are scandalous and the Government seems to think they can get away with doing nothing to address the problem. Despite prior promises to protect them, the plight of older people is being ignored.

While many over-50s are burdened by soaring inflation, they watch their savings being shot to pieces by the lowest interest rates in history.

If interest rates were low and inflation was low, things might look okay but low rates and booming inflation are inflicting a double whammy on older people, eroding the value of their hard-earned savings month after month.

Helping savers achieve better returns from their capital is now more pressing than ever as National Savings will no longer offer tax-free inflation-linked savings certificates – which were the only way savers could properly protect their money against the ravages of inflation.

Hide Ad
Hide Ad

The crux of the matter is that, as prices continue to soar, this important group of people, many of whom are often on a fixed income, are rapidly getting poorer. And there is no guidance, help or respite being offered by our Government.

It’s important to remember that this group make up a third of Britain’s population, and these older consumers have the power to create jobs through their spending habits and behaviour. So their plight should not be overlooked by policy-makers. Some help is urgently needed.

One of the ways in which the Government could help improve the over-50s’ financial position would be to allow higher ISA limits for older people.

Allowing older people to earn tax-free interest is the equivalent of an interest rate increase. For example, a three-year ISA account paying 3.9 per cent would be the equivalent of receiving 4.9 per cent interest if you are a basic rate taxpayer.

Hide Ad
Hide Ad

And the same account would be the equivalent of a taxable account paying 6.5 per cent interest for a 40 per cent taxpayer. So increasing the tax-free ISA limit could be the equivalent of boosting the return on taxable savings by one to 2.6 per cent.

Higher ISA limits for the elderly is not a new idea, and has been done before but it would provide some much-needed respite for many older people grappling with the rising cost of living. Of course, it is also essential that everyone shops around to find the best interest rates available for their money, rather than leaving it languishing in low-paying accounts.

The economy is suffering one of its most prolonged periods of stagnation, and while there are no easy solutions to our current predicament, there is an opportunity to make life for older people a little bit easier.

Introducing a more lenient ISA limit for the over-50s will not only help those savers who are suffering the most, but it should encourage them to spend more, thereby helping the UK on its way to economic recovery. Older people spend a much higher proportion of their income than the young, but currently they are cutting back due to fears of inflation.

Hide Ad
Hide Ad

Of course, the economy cannot be fixed in a day but if people are going to continue to endure this financial discomfort, action must be taken to ease the pain.

Until older people are able to spend again or feel that their savings are safely protected we have reached a stalemate. It’s high time the Government took heed of the needs of the older generations. Fairness demands it.