Rishi Sunak says he ‘can’t resolve’ state pensions
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This comes following the Bank of England’s recent assertion that the UK’s inflation rate will exceed 13 percent later this year. Financial analysts are questioning whether state pension payments will increase by this amount considering these “unprecedented times”. Financial analysts are questioning whether state pension payments will need to increase by this amount considering these “unprecedented times”.
The triple lock is a pledge made by the Government to raise pension payments by either inflation, average earnings or 2.5 percent; whichever is the highest rate.
Last year, the Government temporarily scrapped this promise due to earnings being artificially inflated following the Covid-era furlough scheme.
Due to this decision, older Britons only saw their state pension go up by 3.1 percent, in line with the Consumer Price Index (CPI) inflation rate for the year to September 2021.
With ministers signalling the triple lock’s return, pensioners look set to see their payments go up.
READ MORE: State pension set to rise next year but 520,000 people will miss out
This comes amid the UK’s continuing cost of living crisis which is putting financial pressure on older households particularly.
New predictions for the price cap estimate that the average household energy bill hit around £3,500 in October.
Furthermore, families are forecast to see their household energy prices exceed £4,200 in the New Year.
While the Government has launched a substantial support package, the return of the triple lock will likely be the biggest boost to pensioner incomes.
Steven Cameron, the pensions director at Aegon, noted that the Bank of England’s inflation forecast of 13 percent suggests that pensioners are likely in for a windfall payment boost this coming April.
Mr Cameron explained: “The latest report from the Bank of England’s Monetary Policy Committee predicts CPI inflation could rise from 9.4 percent in June to 13 percent in 2022 Q4, remaining ‘at very elevated levels’ through 2023, before falling to two percent, its target, in two years’ time.
“Under the triple lock, state pensioners receive an increase each April based on the highest inflation in the year to the previous September, earnings growth to the previous July or 2.5 percent.
“So the first big question is just how high will inflation be for the year to September? A 13 percent figure would see the full new state pension increase from £185.15 to £209.20 per week next April.”
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The finance expert also questioned whether raising state pension payments in this way is viable in these “unprecedented times”.
He added: “But the longer term question is whether in these unprecedented times, with inflation on a rollercoaster ride, does it make sense to base state pension increases on a year by year calculation.
“Using fixed dates, well ahead of the actual April increases, adds further to unpredictability and can lead to inequalities between those of working age whose earnings may be increasing at a very different rate from state pension increases, but whose National Insurance contributions pay for state pensions.
“Moving to a formula which averages these indicators out over say a three year period would still protect pensioners, but would average out the peaks and troughs, and arguably create a fairer and more predictable outcome for all concerned.”
With the leadership contest for the next Prime Minister underway, Liz Truss has pledged to reinstate the state pension triple lock for the next three years if she wins.
In comparison, Rishi Sunak promised to bring it back during his time as Chancellor, citing it as a temporary measure.
Whether the UK’s inflation rate will reach 13 percent remains to be seen but will likely be revealed in the coming months.
Any rise to state pension payments will be implemented next year from April 2023.
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