Debts & Loans

Thousands of people relying on savings to top up their pension income have been affected by recent reductions in the interest rates paid by banks.

Among the many pensioners to have suffered as a result of plummeting interest rates is Joe Routledge.

"We really need the interest on our savings to pay bills," said the 77-year-old.

"It pays the £300 to £400 for our car insurance, as well as things like electricity."

He and wife Veda, 63, a former children's home worker, have been forced to shift around the £15,000 they had squirreled away, as they search for better rates.

When told in November that the £5,000 they had in two Barclays ISAs was reaping just 1.7%, compared to the 5% or so they were used to, the couple moved the cash to a one-year bond with the Halifax paying 3.75%.

"There was no way I was going to leave that much money in an account like that, there was no point," Mr Routledge said.

"The problem now is that the money is tied up for a year, so we can't get at it when we need to pay our bills.

"We will just have to economise and cut down on food expenses by shopping around," he said.

Mr Routledge said he was luckier than many.

The couple's west London home is subject to registered rent, preventing the landlord from increasing charges beyond what the local authority deems is "fair".

Since a heart complaint forced him to take early retirement from his job with BOC, Mr Routledge has received a company pension - now £96 a month - on top of the couple's combined weekly state pensions totalling £150.

They receive housing and council tax benefit but lose out on the full amount because of the very savings they put aside to fund their retirement.

A couple with less than £16,000 in the bank qualify for the benefits and can hold £6,000 in savings without affecting their payments.

But for every £500 they have saved over that amount, the authorities assume they earn £1 per week in "tariff income" and reduce the benefit payments accordingly.

Slashed income

The Routledges' tariff income is calculated at £18 per week, or £936 per year.

But with their interest payments falling well short of covering this, Mr Routledge said it has effectively left them hundreds of pounds a year worse off.

"The biggest problems are gas and electricity prices. We've got storage heaters in the hall but we can't afford to burn them all the time," he said.

"Because of my heart condition I don't drink much but I do like to have a pint. I'll be lucky if I can get to the pub twice a week now."