Who said pensioners never had it so good?

There are plenty of studies out there claiming to show that pensioners have never been better off. However, if you are one of many thousands of pensioners struggling to make ends meet, you're gong to struggle to appreciate the irony. For them, retirement is a daily struggle with a dwindling income and soaring outgoings - and an endless losing battle against the spectre of debt.

It's true that pensioners have become richer compared to the rest of society (as we wrote about here), but this isn't an absolute improvement, in fact life has just got harder for everyone.

Poor pensions

It's also true that occupational pensions are more generous for current pensioners than they will be for those in the future, but a large proportion of pensioners don't have an occupational pension. This is particularly true of women - as only 43% of women over the age of 65 have a workplace pension. The rest are reliant on their husband's pension or the state.

Even those with occupational pensions aren't home and dry. Changes in regulations have meant that many payouts from occupational schemes have been allowed to increase at a slower rate than inflation - leaving pensioners having to stretch their income further each year.

For those with private pensions, the chances are that they were unable to afford an index-linked annuity, so the vale of their pension will drop more dramatically with each passing year.

The returns on annuities themselves have plunged to record low rates too. A combination of bond rates and longevity mean that they have dropped more than 50% since 1990, and 10% since last August alone. It means there's a very real risk that anyone with a personal pension or a defined contribution occupational pension is getting half the income they were expecting in retirement.

And of course, current pensioners have been subjected to outdated pension rules which mean that when they retired they either had to live with rigid rules on drawdown, or saddle themselves with an enormously expensive annuity. They won't have any opportunity to take advantage of the pensions revolutions on the way later this year: there won't be any pension freedom for this group.

Those who were hoping to live off interest on their savings, meanwhile, have been dealt a savage blow by the financial crisis. Many were already struggling to deal with the fact that they put together their savings plans back when interest rates were over 10%, and by 2008 the average rate was a little over 5%. Now the average rate is well below 1% - so that the income from savings is a tiny fraction of what they might have been expecting.
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Benefits cuts

Government assistance for pensioners has been decimated. All the talk may be of the state pension and universal benefits, but more quietly there have been devastating cuts to pensioner benefits. The pension credit, for example, is designed for the poorest pensioners. This was reduced by freezing the Savings Credit element for four years from 2011. It meant fewer pensioners were eligible for it, and that about 1.7 million pensioners lost an average of £3.20 a week.

Housing benefit payments have also been capped for private tenants at 30% instead of 50%. One third of pensioners over the age of 65 are tenants, and 5% of them live in private rented accommodation, so these people may have been forced to leave homes they have lived in for decades - or face financial ruin.

Meanwhile, council services have been hammered by spending cuts. Essential services for the most vulnerable have been hit hard, and the extra funding announced for social care falls far short of the sums needed to maintain services. Pensioners have seen services cut or charges increased for everything from meals on wheels to sheltered housing, help at home and long term care in nursing homes.

The triple lock on state pensions hasn't offered guaranteed protection either. The problem is that when the system was changed, the government took the opportunity to switch from tracking RPI to CPI - a consistently lower measure of inflation. In the first four years after the new system was introduced, it left pensioners £60 worse off than they would have been if the system hadn't been changed at all.

Cost of living

Meanwhile the cost of living has soared. Figures from LV= found that between the year 2000 and 2012, the cost of living for pensioners increased by a third. The food bill saw one of the most drastic increases - with a 45% hike, while the cost of transport rose 44%, and the cost of putting a roof over your head (and heating and lighting your home) rose a shocking 42%. It's hardly surprising that so many people are struggling with dwindling incomes and soaring costs.

The result of this huge stress on pensioner budgets is that millions have gone into debt. Prudential found that one in five people are already in debt on the day they retire, with borrowing averaging £31,000. Some of them can pay this off with the lump sum from their pension, but not everyone is so lucky, and even those who can afford to wipe the slate clean will soon start building their debts up again.

Research from MGM Advantage found that just over a third of all pensions are in debt - which is around four million people. Aviva calculates that the typical retiree with unsecured debt now owes £23,188. It's hardly surprising, therefore, that five times as many pensioners are being declared bankrupt now than a decade ago.

Non-retirement

The upshot of much of this is that many retirees have simply been unable to actually retire. The National Association of Pension Funds has found that 48% of people plan to work beyond retirement age, and eight out of ten of them will do so because they simply cannot afford to retire.

This is particularly the case for those women who have already been affected by the increase in the state pension age. They went through their working life expecting to retire at 60, and as they reached the stage when they could finally stop work, the government moved the goalposts to keep them in work for years longer.

You have to ask yourself - if this is what constitutes a golden age for retirees, just how desperate are things set to become in future?

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