According to the latest inflation figures, the full new state pension is projected to rise to £5.55 per week next year.
The Office for National Statistics (ONS) said the consumer price index (CPI) measure of inflation currently stands at 3.1 per cent, down 0.1 per cent from September.
If the government approves the raise, retirees on full state pensions would receive £185.15 each week from April, a 3.1 percent increase from the current total of £179.60.
Basic state pensioners will see a percentage increase equivalent to £141.85 per week.
State pension increases are usually determined by the triple lock, which was introduced in 2010 to ensure that the allowance does not realistically lose value.
Under this system, the state pension increases by the rate of inflation, the average wage increase or 2.5 percent, whichever is the highest.
However, the government announced in September that it was suspending the system over fears that recent increases in wage income had made it ineffective.
In the three months to July 2021, average wage growth increased by 8.3 percent, skewed by the reopening of the economy. If the triple lock mechanism is implemented, it will lead to a significant jump in the state pension.
Consequently, next year’s growth will be calculated at the rate of inflation, which is higher than the 2.5 per cent fall-back option.
Quilter’s pension expert Ian Brown said the April change would still be the third biggest change in the last decade, behind the 5.2 percent growth in 2012/13 and the 3.9 percent increase seen last year.
However, Aviva’s Alistair McQueen said the 3.1 per cent rate was a “backward-looking measure”, as it only reflected the price hike from September 2020 to September 2021. So it lowers recent food and fuel costs, he warned.
Sarah Penells, a consumer finance specialist at Royal London, shares her concerns. “Rising energy costs will add to the concern that the price hike will outweigh the hikes that will be available to pensioners next year,” he said.
PA. Additional reporting by
Credit: www.independent.co.uk /