The revised Bank of England inflation projection indicates that state pensioners could receive a hefty boost of over 8 per cent starting in April 2023, according to Aegon.
CPI was expected to peak in April 2022 and then begin to fall, according to previous forecasts. Inflation is expected to rise further in the coming months, reaching over 8 per cent in 2022 Q2 and peaking at the end of the year, according to the Bank of England. According to Aegon, this might result in a potential increase of over 8 per cent for state pensioners in April 2023, the biggest since the triple lock was implemented.
The Bank of England has now agreed to raise interest rates by 0.25 per cent to 0.75 per cent, making this the third increase in a row.
Aegon pensions director Steven Cameron says: “The Bank of England’s latest prediction is that inflation might reach 8 per cent in the Spring and could be even higher later in the year. Previous forecasts had suggested a peak in April but then a gradual decline. While further short term increases will be highly unwelcome to the millions already struggling with the current cost of living squeeze, there could be a silver lining for state pensioners.
“The state pension triple lock grants increases of the highest of earnings growth, inflation or 2.5 per cent, although for the coming tax year the government has removed the earnings component due to distortions during the pandemic and furlough.
“Many pensioners were left disappointed when the government broke this manifesto commitment and temporarily replaced the triple lock with a less generous ‘double lock’, meaning the state pension will rise by 3.1 per cent this April, far below the current inflation rate of 5.5 per cent. For those already struggling with rising prices, this may leave pensioners feeling left out in the cold.
“But the calculation of the increase from April 2023 will use inflation till September 2022, which could be near its peak of 8 per cent or above. The triple lock will pay this, or even more if earnings growth is higher again.
“Without the government doing any further tinkering, this could put state pensioners on target for a bumper 8 per cent plus increase in 2023, potentially the highest increase ever, compensating for the relatively low increase this April. While not helping to alleviate this year’s pressures, it will at least offer a more generous increase in the future. And, any significant increase in the state pension will boost the income of current state pensioners and future generations.”