30 Jan 2009

Elderly earnings hurt by lower interest rates

3:31 pm on 30 January 2009

Cuts in interest rates have dealt another blow for those living off their savings.

All the major trading banks dropped interest rates on Thursday after the Reserve Bank lowered the Official Cash Rate rate to 3.5% - its lowest since 1999.

The Reserve Bank has lowered the rate from 8.25% since July 2008. New Zealand is officially in a recession, which began nine months ago. Inflation is 3.4%.

Retirement Commisssioner Diana Crossan says the effects of the recession and the loss of savings through collapsed finance companies are also eating into retirement earnings.

Ms Crossan says some people's savings had already taken a 25% hit before the latest cut in the benchmark interest rate.

Grey Power says going back to work to meet the shortfall in their incomes is not an option for many older people.

Age Concern president Liz Baxendine fears the worst is still to come for pensioners living on dwindling incomes.

Grey Power is meet Prime Minister John Key at the end of February to ask what the Government will do to help.

The Reserve Bank will next officially consider interest rate levels in March.