Changes to the Bank of England base rate have resulted in monthly savings-based income dropping from £158 a month to just £16.
Britain's over-65s have suffered a 25 per cent drop in income over the past year, according to an equity release specialist.
Safe Home Income Plans (SHIP) said that the Bank of England's decision to dramatically cut interest rates over recent months has blown a hole in the finances of retirees who rely on interest from savings to supplement their pension income.
Since the middle of last year, the Bank has slashed its lending rate from five to just 0.5 percent, in the hope that cheaper borrowing rates will provide a boost to the recession-hit UK economy. While this policy has resulted in mortgage firms making their loans cheaper, savings account rates have also plunged.
Recent data from the bank showed that the average return from an instant-access deposit account was now below 0.2 percent, while even best-buy ISA products only return three percent.
SHIP said that the average pensioner got a return of £158 per month from savings - 29 percent of overall income - in March 2008. By April 2009, this total had dwindled to just £16 - or four percent of income.
Andrea Rozario, Director General of SHIP commented: "Many pensioners have saved their whole lives with the expectation that they can use income from this capital and the state pension to fund a comfortable retirement. However, with the unprecedented movements of the UK base rate, thousands of pensioners are now contemplating how they will survive without up to a third of their income."
