Headline inflation rate not representative of pensioner living cost rises
25th January 2022 10:33
by Rebecca O'Connor from interactive investor
Our head of pensions and savings responds to the DWP abstract of benefit rates.
The Department for Work and Pensions has published its latest ‘Abstract of benefit rates’, including information on state pension upratings and real rates of the basic state pension, in 2021 prices, over time.
In its analysis, the ONS states that: “Since the introduction of the triple lock guarantee in April 2011, the value of the Basic State Pension has either exceeded or kept pace with CPI inflation.” There was a slight dip between April 2020 and April 2021 in the real value of the Basic State Pension, according to the figures (see table below).
Becky O’Connor, Head of Pensions and Savings, interactive investor, said: “Although state pension upratings have largely kept pace with CPI inflation, this isn’t enough to feel satisfied that all pensioners are able to keep up with the rising cost of living.
“Inflation is a subjective experience and can be different for different households. We know, for example, that pensioners tend to spend a higher proportion of their overall income on energy and food, so disproportionate price increases in these categories affect them more.
“It’s clear that the coming 3.1% rise in the state pension this April will not be enough to support the basic living cost rises of older households who depend on this benefit, if inflation continues to be significantly higher for the rest of the year.
“In these times of high and rising inflation, considering the impact of rising prices for different types of household in uprating decisions, might lead to a more representative result.”
“The choice of inflation measures is ultimately political, which the ONS itself points out in a briefing note in put out in 2013 on ‘Implications of the differences between the Consumer Price Index and the Retail Price Index’*.”
| Date | Rate of basic state pension | Real value of BSP at date of uprating in 2021 prices |
| Apr-11 | 102.15 | 131.22 |
| Apr-12 | 107.45 | 133.42 |
| Apr-13 | 110.15 | 132.93 |
| Apr-14 | 113.1 | 133.18 |
| Apr-15 | 115.95 | 135.32 |
| Apr-16 | 119.3 | 137.42 |
| Apr-17 | 122.3 | 136.08 |
| Apr-18 | 125.95 | 135.59 |
| Apr-19 | 129.2 | 134.98 |
| Apr-20 | 134.25 | 138.15 |
| Apr-21 | 137.6 | 137.6 |
Notes to editors:
Abstract of benefit rates published here
Briefing note on use of inflation indices here: ‘The use of the CPI, RPI and their derivative indices for government policy-making purposes, in particular, has been and remains a political decision, made by the government of the day.’
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