Families will need to find £1,500 more this year

THE average UK household will need to find more than £1,500 extra a year to maintain the standard of living they enjoyed a year ago, a new report has claimed.

A study published by insurer MGM Advantage estimates that a typical UK family would need to spend an extra 1,530 this year to maintain their standard of living, after figures released on Tuesday revealed inflation rose again in April - to 4.5 per cent, from 4 per cent the previous month.

Experts have warned that the rising cost of living is putting pressure on many families - who are unable to find the extra cash to fund the price increases.

"Many people across the UK are already finding themselves right on the edge of being able to cover their monthly outgoings with their income. However, the continued increase in the cost of living is likely to drag more people over that edge and into serious financial difficulty," said Joanna Elson, chief executive of Money Advice Trust.

"The reality is that many people are lowering their living standards to make sure they can continue to live within their means. However, for some it is simply not possible to cut back any more."

The study estimated that the total cost to the UK population to maintain their standard of living is more than 40 billion.

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Duty on alcohol and tobacco rose by a record 5.3 per cent between March and April compared with a rise of 2.1 per cent a year ago, according to the Office for National Statistics. Air fares rose by 29 per cent over the same period, while sea travel fares increased 22.3 per cent.

The last time inflation rose higher than 4.5 per cent was in September 2008, at the height of the banking crisis, when it reached 5.2 per cent.

Lucy McTernan, chief executive of Citizens Advice Scotland, warned that job uncertainty and public sector cuts had compounded the financial situation for many Scots.

"Scots are already facing a 'perfect storm' of financial troubles, including pay freezes, job losses, public sector cuts and changes to the benefits system," she said. "On top of this, families up and down the country will now find that their money will not stretch as far, as inflation runs at twice the level of wage increases."

Even retired people - who theoretically spend less on entertainment, travel and tobacco and alcohol - are still hundreds of pounds worse off, hit by soaring fuel bills.

The average rise in the cost of living for households where the main occupant is aged 65 to 74 is 955, while for households of people over the age of 75, the figure is still as high as 704.

"For those approaching retirement or who have recently retired and are on a fixed income, rising prices may be particularly hard to cope with," said Ms McTernan."It is a particular worry that gas and electricity prices continue to increase, putting many in a position where heating is a significant expense.

Andrew Tully, pensions technical manager at MGM Advantage, said: "The CPI rate of 4.5 per cent will continue to hurt people in retirement. The price of goods is rising at an alarming rate and coupled with the fact that people are living much longer, means many people in retirement are finding it more difficult to survive financially."