State pension triple lock rise could be ‘eaten up’ by surging cost of living

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The policy, which was suspended last year, guarantees that the state pension rises in line with either average earnings, inflation or 2.5 percent. Experts believe inflation could hit 13 percent in September, meaning pension payments could rise to more than £200 a week next April.

But with the energy price cap due to hit £3,549 from October and other spiralling costs for daily essentials, many pensioners will be concerned if the larger amount will make much of a difference.

Claire Trott, divisional director for Retirement and Holistic Planning at St James’s Place, told “The mismatch between the date that the increases are determined and the date they come into effect, will have a significant impact on the benefit to those in receipt of state pensions.

“By the time that the state pensions increase in April, pensioners will have seen many months of higher costs.

“This may well mean that they will have dipped into their savings and any benefit of the increase will have been eaten up.”

She warned that the increases in the cost of living will vary for different pensioners.

She said: “It depends on their lifestyle and personal circumstances and other assets that they hold.

“Whilst some pensioners will see increases in living cost rise significantly

less than the increase in state pension, many will see increases in their cost of living over and above the rate of inflation.

“This will result in a loss of their overall real terms income.

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“Although it could be argued that the increases should be more real time, or

increase sooner after the date of calculation, it isn’t feasible in the real world for this to happen.”

The pensions planning expert encouraged Britons to think ahead about their finances.

She said: “Whilst it is very difficult for pensioners to plan ahead, we should know the increases in April.

“There are many ways to assess your personal inflation rate, and this can be helpful to try and plan expenditure over the longer term.

“Advice with regards to making your money work harder for you and taking advantage of all tax reliefs and benefits available can make a significant difference to long term cash flow.

“By utilising different assets to provide an income, pensioners can reduce taxation and make funds last longer.”

Experts have raised concerns that the Government will not reintroduce the triple lock, however there hasn’t been any indication that it will not be reintroduced.

Tom Selby, head of retirement policy at AJ Bell, said that he believes the Government will bring back the policy.

He said: “The ‘basic’ state pension and the ‘new’ state pension both benefit from the triple-lock guarantee, meaning they increase by the highest of average earnings, inflation or 2.5 percent.

“The inflation part of the triple lock will almost certainly apply for the 2023 increase, assuming the triple lock is retained.

“The now former Chancellor, Rishi Sunak, temporarily suspended the triple lock due to an unforeseen year-on-year spike in wage growth in 2021 after the pandemic suppressed wages in 2020.”

The basic state pension is currently £141.85 per week, while the new state pension is £185.15 per week.

If inflation hits 13 percent in September, the basic state pension would rise by £18.45 to £160.30 while the new state pension would rise by £24.10 to £209.25.

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