State pension payments to exceed £200 a week next year – ‘Astronomical!’

World News

Rishi Sunak says he ‘can’t resolve’ state pensions

We use your sign-up to provide content in ways you’ve consented to and to improve our understanding of you. This may include adverts from us and 3rd parties based on our understanding. You can unsubscribe at any time. More info

This “astronomical” rise is being attributed to the expected return of the Government’s triple lock pledge. The triple lock is a promise to raise state pension payments by either 2.5 percent, average earnings or inflation. Experts believe once this pledge becomes law again, pensioners will see a £200 boost to their pension incomes

Last year, the Government decided to temporarily suspend the triple lock due to average earnings being artificially inflated as a result of the Covid-era furlough scheme.

As a result, pension payments only went up by 3.1 percent in line with September’s Consumer Price Index (CPI) rate of inflation.

However, last week inflation rose to 10.1 percent with pensioners being one of the most vulnerable groups amid the ongoing cost of living crisis.

With inflation currently outpacing state pensions, campaigners have called on the triple lock return to address this rise.

READ MORE: State pension set to rise next year but 520,000 people will miss out

As it stands, experts believe inflation will hit 13 percent by September, which will exceed average earnings and 2.5 percent.

This means inflation will likely be the barometer for determining how much state pension payments will be raised by.

As a result, pensioners will receive a weekly payment boost of £200 which will help them during the cost of living crisis.

On top of rising inflation, older Britons are preparing for energy bills to top £3,600 in October.

Tom Selby, the head of retirement policy at AJ Bell, shared why he believes it will be unlikely that the Government will go back on their promise to reinstate the triple lock on state pensions.

Mr Selby explained: “The ‘basic’ state pension and the ‘new’ state pension both benefit from the triple-lock guarantee, meaning they increase by the highest of average earnings, inflation or 2.5 percent.

“The inflation part of the triple-lock will almost certainly apply for the 2023 increase, assuming the triple-lock is retained.

“The now former Chancellor, Rishi Sunak, temporarily suspended the triple-lock due to an unforeseen year-on-year spike in wage growth in 2021 after the pandemic suppressed wages in 2020.

READ MORE: Britons in higher bracket can do 2 main things to reduce tax payments

“Nonetheless, it would be extremely divisive to break the triple-lock pledge again on the basis of an unexpected rise in inflation – particularly with a general election on the horizon”

The finance expert broke down how much the basic and new state pensions will go up by if the triple lock is reintroduced.

He added: “Currently, the basic state pension is worth £141.85 per week (£7,376.20 per year), while the new state pension pays £185.15 per week (£9,627.80 per year).

“If inflation in September hits 13 percent, this implies the basic state pension would rise by £18.45 to £160.30 per week (£8,335.60 per year), while the new state pension would rise by £24.10 to £209.25 per week (£10,881 per year).”

When it comes to the likelihood of state pension payments being hiked, Mr Selby noted how this increase will be “astronomical”.

“Other pensioner-related benefits – such as additional state pension (which applies to state pensions for those who reached state pension age before April 2016) and Pension Credit – and working-age benefits also usually rise in line with September’s inflation figure,” he said.

“The cost of increasing the state pension by 13 percent would be astronomical, with each one percentage point rise costing roughly £1billion. And that is not a one-off cost either.

“The inflationary increases are baked-in so state pension costs will be significantly more expensive going forward.”

Source: Read Full Article