State pension increases by 3.1% …but soaring inflation means retirees will still feel the pinch

Writer,

When is a pay rise not really a pay rise? When the cost of the things you buy are increasing by more than the extra cash you’re receiving.

Sadly, that is exactly the position millions of retirees find themselves in as the state pension rises by 3.1% - exactly half the 6.2% CPI inflation figure recorded in February this year.

The reason is that traditionally the Government uses the inflation rate from the prior September used to uprate benefits. Unfortunately, this was before prices in the UK spiked.

This comes after the Government chose to axe the earnings element of the triple-lock guarantee, with the £5 billion annual price tag of keeping this manifesto promise deemed too rich by Chancellor Rishi Sunak.

Had the triple-lock been retained and an 8.3% earnings-linked increase applied, someone in receipt of the full flat-rate state pension would be seeing their weekly income bumped up to around £194.50 this week.

To put it another way, the move has cost them £9.35 per week in retirement income – or £486.20 over the course of the year.

Clearly the choices facing a Government which has spent hundreds of billions of pounds paying people to not work during a Pandemic are difficult, but that is likely to be of little comfort to pensioners feeling the squeeze during this cost-of-living crisis.

These articles are for information purposes only and are not a personal recommendation or advice.


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Written by:
Tom Selby

Tom Selby is a multi-award-winning former financial journalist, specialising in pensions and retirement issues. He spent almost six years at a leading adviser trade magazine, initially as Pensions Reporter before becoming Head of News in 2014. Tom joined AJ Bell as Senior Analyst in April 2016. He has a degree in Economics from Newcastle University.