(16 August 2022) The savings and incomes of older persons could lose 15-20% of their spending power by the end of 2023 putting many older persons at risk of poverty unless the Government takes action in Budget 2023 warns Age Action, Ireland’s leading advocacy agency on older persons and ageing.
Based on average incomes and savings from CSO surveys, Age Action’s analysis finds that the average older person living alone will lose €1,532 in spending power by end-2022 and the average older couple will lose €3,364. By the end of the period 2021-2023, the total loss for older persons could be 20% or more of their spending power and most of them have no way of replacing this loss. While the nominal value of €1,000 remains the same, it will only buy €900 worth of home heating oil or groceries compared to one year ago, and potentially as little as €800 worth by end-2023. By the end of 2022, older persons are likely to experience inflation at 9.8%. This means that although they may have nominally the same income or level of savings, their spending power will be down nearly 10%.
Dr Nat O’Connor, policy specialist with Age Action said “Age Action has examined the likely loss of spending power in 2022 and it is shocking. Over the course of 2022, the spending power of the full rate State Pension alone will go down by €589 for an individual or €1,118 for a couple. This loss of income means a struggle to buy home heating oil or to get a car serviced. It is causing older persons around the country to turn off their heating and to reduce their travel, because petrol and diesel are so expensive. But many people haven’t realised their losses yet, as their income and bank balance still looks the same as last year. It is only when someone goes to spend money that they see how their spending power has eroded and they have been left behind by rising prices.”
“Most older persons have a low level of cash savings and, if they have a private or occupational pension, it is modest and not linked to inflation. With the spending power of both of these being cut, the State Pension is more important than ever as the bedrock of income in older age. That is why Age Action have published an analysis on the loss of spending power and made the case for raising the State Pension by at least €23 from Budget Day, to protect older persons this winter. Raising all social welfare income by at least €20 would cost less than €1.5 billion at a time when inflation has brought in several billion of extra tax revenue. Indexing social protection incomes so they rise in line with inflation is done automatically in the UK and across Europe. Ireland should do the same, to preserve some part of people’s living standards and to keep spending in local shops and services.” Dr O’Connor continued.
Dr O’Connor concluded “We haven’t had this situation since the 1980s, and economic commentators have been too slow to realise just how bad this winter is going to be for older persons, many of whom will struggle to heat their homes.”