Retirees were promised their incomes would still rise by the highest out of inflation or 2.5% – whichever is highest, in April next year, after the the Prime Minister suspended the triple lock last month – calling off an 8% increase
Retirees on the full, new state pension, will see their earnings rise by £290 next year, the government has confirmed.
The state pension will increase by up to £5.50 a week from April 2022, in line with September’s inflation rate of 3.1%.
Earlier this year, pensioners were promised their incomes would still rise by the highest out of inflation or 2.5% – whichever is highest, in 2022, after the the Prime Minister suspended the triple lock last month – calling off an 8% increase.
Today, the Secretary of State for Work and Pension said it would rise by 3.1% following an annual review.
This is in line with September’s inflation figure – the rate factored into the annual state pension increase.
A 3.1% rise means those on the full new state pension will see their annual income jump to £9,628.50 – an extra £289.50.
However experts warn it’s not enough to cover the cost of living. The Bank of England has previously warned inflation could reach 5% by next April when the 3.1% rise kicks in. That’s in response to supply disruption and energy price rises.
The Centre for Economics and Business Research (CEBR) previously estimated this will leave Britain’s elderly £169 worse off in real terms.
CEBR economist Sam Miley said: “Pensioners will be particularly vulnerable to rising prices, due to the fact that their disposable incomes tend to be lower in the first place.
“Meanwhile, the nature of inflation at present, being heavily concentrated in utility prices, is also set to adversely affect pensioners, given that this makes up a relatively larger proportion of their overall spending.”
How much will the state pension rise in April 2022?
To get the full state pension you need a minimum of 10 “qualifying” years in work and 35 years’ worth of National Insurance contributions on your employment record.
Men born on or after April 6, 1951, and women born on or after April 6, 1953, are able to claim the new state pension.
The current full, new state pension is £179.60 a week, or around £9,339 a year.
A rise of 3.1% adds an extra £5.56 a week to the payment, increasing it to £185.15 a week.
Over the year that’s £9,628.50, and an extra £289.50.
Those who reached the state pension age before April 6, 2016, get the old state pension, known as the basic state pension which is currently £137.60, or £7,155.20 a year.
A rise of 3.1% adds an extra £4.26 a week to the payment, increasing it to £141.86.
Over the year that’s £7,377 and an extra £221.81.
Is the state pension enough to live on? Let us know your thoughts in the comments section below
If you’re on the state pension, you may be able to get a boost worth a few hundred pounds a year in the form of Pension Credits.
Around one million people are missing out on this support, figures show. It could also offer reductions on bills such as council tax and a free TV Licence.
Tom Selby, head of retirement policy at AJ Bell, said: “The good news for retirees is the state pension is set to increase by 3.1% next year, boosting the incomes of those in receipt of the full flat-rate benefit by £5.55 a week.
“However, the Government’s decision to suspend the earnings element of the state pension triple-lock means retirees will miss out on a blockbuster 8.3% increase.
“This decision will ‘cost’ someone in receipt of the full flat-rate state pension £9.35 a week in retirement income – or £486.20 over the course of the year.”
If the earnings element of the triple-lock had been retained, the old state pension would have risen by £149 per week and the flat-rate state pension to £194.50 per week.
The savings will net the Treasury around £4.5billion.
Analysts warned the latest increase will leave pensioners worse off amid a cost of living crisis.
It comes as wholesale gas prices have risen 250% in a year, with another increase planned next April.
Becky O’Connor, head of pensions and savings at Interactive Investor, warned: “While those receiving a state pension can take comfort from it heading up in line with inflation from next April, with energy prices rising by the minute and the cost of food and other consumer goods continuing to increase, older people will not feel out of the words yet.
“Pensioners are potentially more exposed than most to rising inflation because their income is limited and a higher proportion of their spending goes on essentials, like energy.
“Older people also tend to loose lower risk investments within their private pensions and are more likely to use cash savings to avoid investment losses later in life, so are more exposed to inflation eroding the value of their wealth. So it is some comfort to know that at least the state pension part of their income is rising in line with inflation.
“However, the economy remains volatile and retired people will be watching to see whether inflation continues to rise. If it does, then next year’s state pension increase may still not feel big enough to cope with rising bills.”