Retirement savingsA new survey has shown that 1 in 7 pensioners, over the age of 65, are thinking about taking in a lodger to help make ends meet.

The survey by More Th>n Home Insurance highlighted just how financially stretched some pensioners are:

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  • Around 50% of retirees, equivalent to five million people, are looking for alternative sources of income
  • The average weekly income of the pensioners who took part in the survey is £224 per week and spends £190 on the cost of living
  • Around 15% of pensioners are considering renting out a room to help increase their income

Rent a room

Pensioners who decide to rent a room could produce a tax-free income to supplement their pensions.

The Rent a Room Scheme allows a homeowner or tenant to receive up to £4,250 tax-free each year from a lodger. Any additional income over this amount may be subject to income tax, if, when it is added to other income, it takes the total income figure over the Personal Allowance.

For people born after 5th April 1948 the Personal Allowance in the current tax-year is £9,440, rising to £10,000 in the 2014/15 tax-year. For those people born between 6th April 1938 and 6th April 1948 the Personal Allowance is £10,500 in the current and next tax-year.

Inflation hit pensioners

The rate of inflation has fallen over the past few months and now sits at 2%. However, it is widely accepted that pensioners suffer a higher rate of inflation, because a larger percentage of their income is spent on goods and services which rise in price above the average rate of inflation.

One example is the money spent on fuel bills, with five million households currently living in fuel poverty; defined as spending more than 10% of income on utility bills.

Although the State Pension has risen by £2.97 per week, the rise in fuel and energy costs is one of the main reasons many pensioners are struggling to make ends meet.