State pension set to ‘fall’ as inflation forecast to hit 7% later this year

World News

Retirement expert advises people to learn about their state pension

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

Recent reports suggest that the inflation could rise dramatically if the energy price cap increases as expected in April this year. The energy price cap is the largest possible amount a company can charge an average UK consumer annually for the amount of electricity and gas they use. This measure is designed to stop businesses from passing on the rising expenses to their customers, however the energy price cap is expected to be near £2,000 in a few months time.

Primarily due to the exponential rise in wholesale gas prices in recent months, households are preparing for a steep hike in their energy bills, which usually come to around £1,277 a year.

However, experts are sounding the alarm that pensioners are in the firing line of this pending crisis as state pension payments may not be enough to keep homes heated until the worst of it subsides.

The Times is reporting that internal Government estimates suggest the effect of the energy price cap could hike inflation to 6.7 percent, which would be the highest it has been in 30 years.

Currently, state pension payments are set to rise by 3.1 percent to align with October’s inflation report.

READ MORE: Plan NOW to avoid the great 2022 pensions tax raid – ‘Sunak to atta…

Controversially, the Government opted to scrap their triple lock pledge on the state pension, which sees payments rates increased by either the rate of inflation, the rise in average earnings of 2.5 percent; whichever is highest.

Due to average earnings being artificially inflated as a result of the pandemic, the triple lock has been temporarily suspended to cut costs.

This move may end up being short-sighted by the Government, according to experts, as the expected “squeeze” in living standards is predicted to hit state pension claimants hardest.

If the earnings link had continued to be part of the triple lock, pensioners would have seen an 8.3 percent increase in their incomes.

Last month, Steve Webb, the former pensions minister and partner at LCP said: “Unless the government rethinks the 3.1 percent state pension increase, 12 million pensioners could face a significant squeeze on their living standards next year.

“Not only will state pension payments fall in real terms, but income from private pensions will be squeezed, and inflation will eat away at the value of savings held by pensioners in cash ISAs and bank accounts.

“The Government has shown that it can change Universal Credit rates at short notice when it wants to, and it will now come under pressure to re-think the modest state pension increase it had planned for April 2022.”

In relation to the price cap increase, Justina Miltienyte, an energy policy expert at, said: “With predictions of a near £2,000 price cap on the way, many households could be faced with the stark choice of heating or eating if action is not taken to support them in the coming months.

“A five percent VAT cut on energy bills was never going to be enough to offset a predicted 50 percent price cap increase.

“But, it’s alarming that the Government has seemingly scrapped the idea so hastily without an alternative, at a time when consumers are bracing themselves for a catastrophic bill hike.

“We repeat our calls on the Government to upscale its targeted support for vulnerable households, in a way that is reflective of the cost increases that consumers will see coming in April.

“While the Government continues to rely on Warm Home Discount as a way to help the most vulnerable, the support is nowhere near enough and the payments should be automatic for all who qualify. Now is the time for the Government to act, and fast.”

A Government spokesperson said: “We recognise people are facing pressures with the cost of living and we want to ensure pensioners receive all of the support they are entitled to.

“Our winter fuel payments are supporting over 11 million pensioners with their energy bills and we are continuing to encourage those eligible for Pension Credit, and the wide range of other benefits it can provide, to make a claim.

“The one-year response to temporarily suspend the Triple Lock ensures fairness for both pensioners and taxpayers.

“Combined with last year’s 2.5 percent increase to pensions – a step we took when earnings fell and inflation barely rose – we have ensured pensioners’ incomes have been protected amidst significant economic upheaval.”

Source: Read Full Article