Recently, Britons received the news CPI inflation had risen to 10.4 percent, in a move which shocked economic experts. It means even next month’s 10.1 percent boost to the state pension will fail to keep pace with inflation.
However, it is high inflation coupled with a raging debate on the triple lock, set against a backdrop of state pension age hikes which are concerning to many.
Experts weighed in on the future of the state pension when speaking exclusively to Express.co.uk.
James Jones-Tinsley, chartered financial planner and self-invested pensions technical specialist at Barnett Waddingham, said: “Politics is – once again – dictating the direction of pension policy even though pensions, as long-term tax-efficient savings vehicles, should in an ideal world be apolitical.
“We have learnt that because of falling life expectancy in the UK, together with warnings from Conservative MPs that the decision could lead to a backlash amongst middle-aged voters, Government ministers have decided to delay their plans to raise the state pension age (SPA) to 68 earlier than is currently legislated.
“As it was not mentioned in the Spring Budget, we were anticipating confirmation in early May that the increase in SPA from 67 to 68 would be brought forward from 2044-46 to as early as 2037–39.
“However, according to officials, the decision will not now be made until after next year’s general election.”
Other than political issues, there are also alternative factors which come into play, according to the expert.
One of these is the issue of life expectancy which has loomed large for many years.
While life expectancy is, on average, increasing, there have been dips noted in recent years.
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This means anticipated improvements in life expectancy when the state pension age was last reviewed have not come to pass.
Mr Jones-Tinsley attributed this to the effects of the COVID-19 pandemic, as well as NHS backlogs and non-diagnosis of life-threatening illnesses during lockdown.
However, the decision could also have further reaching implications, the expert said, namely for the triple lock.
The triple lock ensures the state pension rises each year by whichever is the highest of: 2.5 percent, inflation or average earnings.
The policy will return, after a temporary one year suspension, in a few days to provide a 10.1 percent boost.
Mr Jones-Tinsley added: “Whether this deliberate deferment by the Government in order to secure as many votes as possible for their re-election means that the state pension triple lock will also be preserved until after the general election remains to be seen.
“But with inflation unexpectedly increasing to 10.4 percent in February, its cost to the Government could become increasingly untenable.
“It may reluctantly force them to introduce another way of calculating annual increases in the state pension.”
Simon Dawes, head of wealth management at Cooper Associates, also warned alternative suggestions may have to be investigated.
He added: “Previously, the state pension would cover the last 10 percent of a person’s life. Now, because people are living longer, it may have to last for up to a third.
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“This is a huge burden on the Government, and we should expect to see more changes to pensions in the future to reflect our changing population.
“Thinking long term, it’s absolutely possible we could see the state pension becoming a means-tested benefit.”
A DWP spokesperson recently told Express.co.uk that the Government is required by law to regularly review the state pension age.
They added: “The next review will be published by May 7.”
The Government has previously vowed the triple lock will be in place for the remainder of Parliament.
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