Payout to rise by £5.50 approximately a week next year following inflation data, but pensioners not out of the woods when it comes to rising living costs.
Pensioners are set to receive a boost of a little more than £5.50 a week – around the cost of a bottle of supermarket wine - to their weekly incomes from next April as the official September inflation figures, which are used to dictate the state pension rise for the following year, showed a 3.1% rise in consumer prices over the year.
It means a pensioner who receives the full new state pension can expect a rise from £179.60 a week to £185.15 approximately a week from their pension – from £9,339 to £9,628 a year, from April 2022.
The rise could potentially have been higher at more than 8%, had the government not decided to scrap the triple lock guarantee for one year. The triple lock is a measure that guarantees rises in the state pension by inflation, 2.5% or wage increases, whichever is highest, every year.
However this year, because wage increases were artificially distorted due to the pandemic, the wage link part of the triple lock was scrapped. The government says it will be reinstated after one year.
Becky O’Connor, Head of Pensions and Savings, interactive investor, said: “Despite today’s inflation figures indicating a coming rise in pensioner incomes, times still feel perilous as living costs continue to increase in unpredictable ways
“While those receiving a state pension can take comfort from it heading up in line with inflation from next April, with energy prices rising by the minute and the cost of food and other consumer goods continuing to increase, older people will not feel out of the words yet.
“Pensioners are potentially more exposed than most to rising inflation because their income is limited and a higher proportion of their spending goes on essentials, like energy.
“Older people also tend to choose lower-risk investments within their private pensions and are more likely to use cash savings to avoid investment losses later in life, so are more exposed to inflation eroding the value of their wealth. So it is some comfort to know that at least the state pension part of their income is rising in line with inflation.
“However, the economy remains volatile and retired people will be watching to see whether inflation continues to rise. If it does, then next year’s state pension increase may still not feel big enough to cope with rising bills.”
The rising cost of living is a financial concern for a third of retired people, according to the interactive investor Great British Retirement Survey.
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