New research published by insurance company Saga shows that 1 in 5 people aged over 50 have cut back on the amount they spend on what they consider to be essential items, whilst 68% have reduced spending on non-essential items in an effort to save money.

The report, based on a survey of nearly 12,000 over-50s, identifies the rising cost of living as the primary concern for this age group, with income from pensions and savings following closely behind. Health was less of a worry for the majority of respondents.

Although the latest consumer prices index put inflation at 4.2%, the latest figures from the Office of National Statistics indicate that pensioners are experiencing an inflation rate of 6%.

The Saga Quarterly Report also shows that, of those in work, a significant proportion are increasing their hours or delaying retirement, whilst the number of 50-64-year-olds who have lost their jobs has also risen. Women were hit hardest by this, with a 9.5% increase in unemployment levels. 43% of unemployed respondents had been out of work for over a year, up from 30% in 2009.

Since the research was carried out, the stock markets have fallen sharply, causing pension funds to drop in value and annuity prices to rise. That means that those preparing for retirement will find their savings equate to a smaller pension income.

Pensioners could see a £278 reduction in their spending power over the next year as inflation surpasses interest rates, according to research undertaken by another insurance company – Prudential.

The financial crisis is affecting everyone, but these figures suggest that it may be pensioners who suffer the most.