Sharp price hikes are hitting the spending power of older people like a “tsunami” and will force many of them to forgo basic necessities such as food, heating, transport and medical bills, advocacy group Age Action warned.
t said that someone drawing the full-rate contributory state pension of €253.30 per week will face a cumulative loss of purchasing power of €589.48 this year, with the biggest impact on spending likely in the second half of this year will occur.
She calls for an increase in the statutory pension of 23 euros in the 2023 budget.
Age Action said many who rely on the state pension as their core income have the least capacity to make up for lost income.
“So you’re going to be missing out on essentials like food, heating, transportation or medical expenses,” said public affairs and policy expert Nat O’Connor.
Age Action will begin lobbying TDs and Senators starting this week, telling them the 9.8 percent inflation rate means that €1 at the start of this year will have purchasing power of just €0.91 through December.
And it will lose more purchasing power in 2023.
Cash savings of €1,000 in January 2022 have purchasing power of €911 in December 2022
By December of this year, the full-rate statutory pension that is subject to contributions will have lost at least EUR 22.61 per week in purchasing power.
“Over the course of 2022, someone drawing the full rate contributory state pension of €253.30 will face a cumulative loss of purchasing power of €589.48,” reads one by Dr. O’Connor prepared information document for politicians.
Cash savings of €1,000 in January 2022 will have the purchasing power of €911 in December 2022, and interest rates offer little or no compensation for this erosion of purchasing power, the lobby group said.
Age Action said there was a strong case for raising the state pension and all basic welfare rates in next month’s budget to prevent people from experiencing the worst inflation this year.
The nature of inflation is that it is fed into the economy, often with bills and prices increasing only a few items at a time.
But the cumulative effect of lost purchasing power adds up, Age Action said.
dr O’Connor has calculated that only 25 percent of the impact of inflation has been felt so far this year, and 75 percent of the lost purchasing power will come in the second half.
“As a result of the drip feeding and the lack of a change in the face value of their income and savings, many people still haven’t fully realized what 9.8 percent inflation means for their purchasing power,” he said.
He said the type of inflation we’re seeing right now is different from the Celtic Tiger’s “boom-time” inflation.
It’s much more like 1980’s inflation in the sense that prices are rising but in isolation from the rest of the economy.
“Even though the ‘rising tide’ of the Celtic tiger boom is said to have ‘raised all the boats’, the current high level of inflation is more like a tsunami hitting the low-lying shoreline,” said Dr. O’Connor.
“Only the people who are already in boats will rise, while everyone else will be flooded.”
dr O’Connor said in a report that raising total basic needs by €20 and the state pension by €23 would cost €1.5 billion “in a context where the state is flooded with revenue from the impact of inflation becomes”.
Revenue rose by over €5 billion through July, with sharp increases in robust tax bases like income tax and VAT. PRSI is up too, he said.
The state can afford to protect everyone with basic welfare rates, but the political culture is so closely tied to the “five” in the budget that politicians are not undergoing the necessary rethinking based on the analysis of what lies ahead now have said Dr said O’Connor.
He said they cannot see the full damage that “the inflation tsunami” will do to people.
“I’m 70 – but if I stop working I don’t think I could make it.”
Annie Curbelo-Lang considers herself lucky to have a roof over her head, but at 70 she has no choice but to continue working as she cannot live on the state pension.
At her home in Boyle, Co Roscommon, she told the Irish Independent she cannot afford to buy heating oil despite working part-time on top of her pension.
“Unfortunately, I was given the wrong advice on the paperwork for my pension. I thought I deposited the right amount of stamps because it said I had to have a minimum amount. I had exceeded that number despite having worked in Italy and Spain for years.
I am generally in good health. If I can keep working, I’ll just about manage. But I can’t afford heating oil at the moment
“But what I didn’t know was that this was the minimum amount to be entitled to a lower pension.
“In the end I had to opt for a non-contributory pension, which is not the end of the world because it costs about 20 to 30 euros less than the full pension, which seems unfair to those who pay in for 30 or 40 years.
“But at the same time, since it’s based on living expenses, they pay a lot less because otherwise you wouldn’t survive.
“My situation isn’t that drastic at the moment, but it can get drastic in that I don’t own my own house, I rent it out.
“I work part-time, a few hours a week, and sometimes I have to drive all the way to Dublin and use the company car. I am 70 and in generally good health. If I can keep working, I’ll just about manage.
“But I can’t afford to buy heating oil at the moment and it’s likely to go up even more later on, so that’s a concern.
“I’m in the HAP program and I’m on the public housing list. At the moment my job pays my rent which is 750€. I get €640 from my work, it all goes towards my rent. The HAP gives me the extra €110 each month to fully cover them.
“If I gave up the part-time job, I wouldn’t have the car and wouldn’t be able to afford a car.
“I don’t want to complain because, of all European countries, Ireland generally treats its pensioners fairly well.
“But if you look at a person like me who doesn’t have a private pension and doesn’t own property.
“If I didn’t have this part-time job, I don’t know how I would do it.
“With the rents at the moment it’s crazy to find an apartment. And how do you, as a 70-year-old, share a place with other people?
I can’t go out and make more than I do now because they would deduct it from my pension
“I don’t want to have to live with my daughter, I want to be independent. You are allowed to earn up to a certain amount, and if you earn more your pension will be reduced.
“In Ireland you have the situation that if you earn a certain amount you pay 20 per cent tax and nobody has a problem paying that much tax. It’s only right that we all pay taxes.
“But if you earn a little more, you’ll be charged 40 percent straight away. That means you don’t want to work overtime and do extra work.
“I can’t go out and make more than I do right now because they would deduct it from my pension, so it’s not worth it. It doesn’t help me.
“Ireland is disastrous in terms of housing. It has many other good points but there are so few options for every age group.
“Due to the cost of housing, in the future we will have many more people dependent on social housing.
“I feel for myself, but I really feel for young people too.
“Now it’s almost impossible for young people to buy their own house or they’ll start paying off their mortgages in their 60s or 70s.”
https://www.independent.ie/business/personal-finance/pensioners-to-take-a-600-hit-due-to-surge-in-inflation-claims-age-action-41914376.html Age Action claims that pensioners have suffered a loss of 600 euros because of the surge in inflation