The incomes of older people in receipt of a state pension could be in for a timely boost with chancellor Rishi Sunak expected to make an announcement
Those who are eligible can expect to receive an extra £300 a year, according to experts
It comes despite the Government controversially announcing it will be abandoning its so-called ‘triple lock’ pledge, albeit temporarily, from next April.
Under the commitment, introduced back in 2010, state pension payments are increased each year by either 2.5 per cent, or the rate of inflation – whichever is higher, writes HertsLive.
The decision to suspend the triple lock results from the winding down of the Government’s furlough scheme, where average earnings were artificially inflated during the height of the UK’s coronavirus pandemic.
But with most people now having returned to work, it would has left the Chancellor of the Exchequer in an awkward position of having to increase the state pension by around eight percent, something that its estimated would cost about £3 billion.
This at a time when the Government is trying to pay back debts built up over the last 18 months, and pay for its proposed social care plan.
Rishi Sunak will instead break the triple lock pledge in favour of a ‘double lock’, which it is hoped will be fairer and even out the distortion in wages.
It means the next increase in the state pension will be either 2.5 per cent – or the CPI (consumer price index) inflation rate.
Secretary of State for Work and Pensions, Thérèse Coffey, explained why the temporary year-long adjustment was needed when addressing the House of Commons.
She said: “This year, as restrictions have lifted and we experienced an irregular statistical spike in earnings over the operating review period, I’m clear that another one-year adjustment is needed.
“It will ensure the basic and new state pensions increase by 2.5 per cent or in line with inflation, which is expected to be the highest figure this year.”
“And, as happened last year, it will again set aside the earnings element for 2022/23, before being restored for the remainder of this parliament.”
Subscribe to receive Leicestershire headlines straight to your inbox – for free
For an easy way to stay on top of Leicestershire’s biggest news, get the latest headlines delivered straight to your inbox.
Simply sign up here to get our bulletins. It’s completely free.
And if you decide you no longer want the updates – no problem. Just follow the unsubscribe link.
She added: “This will ensure pensioners’ spending power is preserved and protected from higher costs of living, but we’ll also ensure that as we are having to make difficult decisions elsewhere across public spending, including freezing public sector pay, pensioners are not unfairly benefiting from a statistical anomaly.”
Economic forecasters now believe the CPI inflation rate to be about 3.3 per cent, however, which will mean pension payments rising by more than originally thought.
It would see weekly state pension payments increasing from £179.60 to £185.55 for anyone retiring since April 2016.
This would equate to an extra £6 per week – or £312 a year., according to analysis by the Mail on Sunday.
That means, despite the unpopularity of abandoning the triple lock commitment, older people would see one of the largest state pension payment increases ever.
Maike Currie, an investment director at Fidelity International, helped to explain the Government’s reasoning.
“The one-off suspension to the triple lock for the state pension has been offered as a way to reset the balance between generations while addressing the data anomaly of an 8.8 percent increase in average earnings,” she said.
“By only suspending the triple lock for one year, the Government has avoided scrapping the manifesto promise completely, instead relying on a double lock of inflation or 2.5 percent – whichever is higher.
“The breaking of the triple lock was almost inevitable, once it was made clear that national insurance contributions are to increase by 1.25 percent for both employees and employers.”
Ms Currie added: “By also applying the levy to working adults above state pension age, the Government argues it is spreading the pain of paying for the pandemic between individuals and businesses, as well as across generations.
“The announcement of a 1.25 percent increase in taxation of dividends is clearly aimed at allaying criticism that the new policy unfairly puts pressure on the working population to provide support for those already in retirement, with no impact on the very wealthy.”
Keep up with the latest news with our email alerts directly to your inbox. Sign up by clicking here.