Despite the state pension rising by 3.1 per cent today, pension experts warn that the value of this benefit will decline in real terms with inflation currently rising at twice this rate.
From today the state pension has been uprated in line with September’s CPI figures. However the government ditched the triple lock for this year, due to distortions in the earnings figures caused by the pandemic and furlough schemes.
This 3.1 per cent increase will mean that the basic state pension (paid to those who reached state pension age before 6 April 2016) rises by £4.25 a week to £141.85 per week.
The flat-rate state pension (paid to those who reach state pension age from 6 April 2016) increases by £5.55 a week to £185.15 per week
Pension experts points out that if the triple lock had been maintained the state pension would have increased by 8.3 per cent, helping maintain its spending power in the face of rapidly rising inflation. This would have pushed the flat-rate state pension up to £194.50 a week.
According to the latest ONS figures CPI rose to 6.2 per cent in February and is forecast to increase further this year.
AJ Bell head of retirement policy Tom Selby says: “When is a pay rise not really a pay rise? When the cost of the things you buy are increasing by more than the extra cash you’re receiving.
“Sadly, that is exactly the position millions of retirees find themselves in today as the state pension rises by 3.1 per cent – exactly half the 6.2 per cent CPI inflation figure recorded in February this year.
“This comes after the Government chose to axe the earnings element of the triple-lock guarantee, with the £5 billion annual price tag of keeping this manifesto promise deemed too rich by Chancellor Rishi Sunak.
“Had the triple-lock been retained and an 8.3 per cent earnings-linked increase applied, someone in receipt of the full flat-rate state pension would be seeing their weekly income bumped up to around £194.50 today.
“To put it another way, the move has cost them £9.35 per week in retirement income – or £486.20 over the course of the year.
“Clearly the choices facing a Government which has spent hundreds of billions of pounds paying people to not work during a Pandemic are difficult, but that is likely to be of little comfort to pensioners feeling the squeeze during this cost-of-living crisis.”
