Despite inflation falling slightly, the Retail Price Index is still at 5.3pc with food and fuel rising rapidly, yet pensioners will only see the basic state pension increase by 4.5pc this year and other benefits by just 3.1pc.
In fact, even the standard Retail Price Index can understate older people's living costs. Age UK Enterprises' Silver RPI measure shows that since 2008 inflation has been higher for older people than for those under the age of 55. This is partly due to low mortgage interest rates – which are less likely to impact on older people – as well as cost increases on products and services like food and energy that over-55s spend proportionately more on.
As a result, we know these are difficult times for many older people and growing numbers are struggling to make ends meet. 1.8 million pensioners live below the poverty line and research that Age UK will release tomorrow shows millions more are teetering just above it. Bills accrued over the cold winter months have put a huge amount of pressure on people's finances and many are still paying the price now.
Of course the options to increase your income once you have retired are few and far between. Nearly 1 million people are now working past 65 in part-time and full-time jobs in order to boost their retirement incomes. But for many people in their 60s, ill health and caring responsibilities for partners or elderly parents mean carrying on working simply isn't an option.
To try to bring poorer pensioners' incomes to a decent level, the Labour government introduced pension credit, which tops us low incomes. Yet around a third of people who are eligible to claim the top up aren't getting it, with up to £3 billion unclaimed. Likewise, almost 2 million pensioners aren't claiming council tax benefit which could save them an average of £728 a year.
The UKPA provides more details, reporting most pensioners 'just getting by':
Rising living costs are causing hardship for British pensioners, with 58% saying they are "just getting by" or worse, according to research.
A study for Age UK has found that 47% of over-60s class themselves as "just getting by", with a further 11% finding it difficult or "really struggling" to cope financially.
The face-to-face survey of 1,258 people conducted last month shows nearly one in five pensioners, or 19%, cut back on heating this winter in order to make ends meet. The same percentage said they are going out less in order to save money and more than one in four, or 26%, said they are buying cheaper or less food.
Among poorer pensioners, the figures rose to more than a third, or 35%, buying cheaper or less food, and 21% going out less. A total of 11% said they are in debt through mortgage, credit cards or bank loans.
The findings have been released to coincide with Age UK's More Money in Your Pocket campaign aimed at encouraging over-60s to claim all the benefits they are entitled to after the charity found as much as £5.4 billion goes unclaimed each year.
Just under a half of pensioners are entitled to pension credit, the top-up for people on low incomes, but a third of people eligible for the benefit do not claim it, according to Age UK.
Up to 1.97 million pensioners are also missing out on council tax benefit worth £1.5 billion a year - if claimed this could boost their income by an average of £728 a year, it calculated, while up to 350,000 older people are entitled to housing benefit but are not receiving it.
Michelle Mitchell, Age UK charity director, said: "At a time when so many people are struggling financially, it is unacceptable that vital benefits are failing to reach some of the poorest and most vulnerable older people in our society."
The charity is urging older people seeking advice on benefits to get in touch with their local Age UK or Age Concern, or call Age UK Advice, the charity's free national advice line, on freephone 0800 169 65 65. The charity has also launched an online "benefits checker" at www.ageuk/benefitschecker.
A spokeswoman for the Department for Work and Pensions (DWP) said: "Some people still miss out despite our efforts to improve take-up. This is exactly why we've set out proposals for reform including a single tier state pension set above the level of the means test."
These findings are discouraging and should concern us. We know that rising food and energy prices are hitting pensioners on a fixed budget particularly hard. And it's not just in the UK. In the US, some outfits like Shadow Government Statistics are pegging the true inflation rate closer to 10%. While these statistics are popular with bloggers and doomsayers, I think this is a gross exaggeration. If true inflation were closer to 10%, bond yields would have spiked regardless of QE2.
But we do know that people are paying more for groceries and to fill up their tank. In my conversation with Pierre Malo yesterday, we talked about inflation. Pierre thinks it's inevitable that bond yields will start rising as he feels inflation is understated. It most certainly is but there is something we should all bear in mind: wages aren't rising so rising food and gas prices act like a tax because people have less discretionary income to spend on other items. That's why I feel rising energy prices are ultimately deflationary, especially if this is a long term secular trend due to shifting consumption patterns in emerging markets (Pierre mentioned that Jeff Rubin is right but was too early in his call).
The Fed's policies are exacerbating income inequality. Great for bankers, Wall Street traders, and the rich who invest in stocks, terrible for pensioners and families getting by on a modest budget. But there doesn't seem to be a big concern about this widening divide, at least not yet. In the meantime, more and more pensioners are living the dark reality of pension poverty.