Health

Are third class state pension increases at stake?


Concerns are growing that a third lock of state pension increase could be threatened after a minister refused to confirm whether the inflation increase would materialize.

The Treasury chief of staff, Chris Philp, declined to confirm to live TV journalist Robert Peston on whether state pensions and Universal Credit will be increased in line with inflation next year. are not.

The state pension could go up to £10,000 a year if the Government keeps its promise to restore a ‘triple lock’ to annual increases.

This guarantee means state pensions are increased to whatever the maximum is 2.5%, wages and inflation – although it was scrapped last year as the pandemic temporarily skewed the figure. income.

Triple lock at stake: The PM had previously pledged to keep a third lock this year, but the latest comments bring uncertainty at an already difficult time for pensioners

Inflation is expected to be the highest factor this year putting retirees in the line with a 10% or more likely increase.

Chris Philp told Robert Peston live on ITV: ‘The matter is under review. Obviously I won’t make a policy announcement here.

‘It will be reviewed in a normal way throughout the coming weeks. I will not publish the policy live on TV. ‘

The lack of assurance the Minister offers will likely concern a large number of pensioners, who are already struggling to cope with the rising cost of living.

Despite the suspension of three courses last year, during the Conservative Party leadership’s campaign, Prime Minister Liz Truss promised to restore it this year.

However, she may be under pressure to turn around due to tight public finances.

Helen Morrissey, senior pensions and pensions analyst at Hargreaves Lansdown said: ‘These comments should cause real concern among pensioners who are banking about their state pension rising. inflation next year under triple lock mode.

‘Many pensioners have struggled with their finances as energy and food costs soar and their incomes cannot keep up.

‘Triple lockdowns were suspended last year as salary data was said to have been skewed by the pandemic’s plan to raise wages and pensioners were given a 3.1% increase instead, in line with CPI inflation at that time.

“Since then, however, it has skyrocketed and many pensioners have banked in large sums from next April to help them get on with it.”

Can the Government drop the triple lock?

If the triple lockdown is lifted again, this could put more pressure on the Government, which has been facing criticism over its economic policies so far.

There is a lot of support for the scheme among pensioners, though less so among the younger generations.

Around 55% of adults returning to a third class under current circumstances, according to a Canada Life survey, are considered representative of all adults in the UK.

But that number drops to 78 percent among people over 55, 44 percent among 35- to 54-year-olds, and 33 percent among 18- to 34-year-olds.

Popular guarantee: State pension on track to increase by 10% if new Chancellor Liz Truss keeps third lock pledge

Steve Webb believes that due to its popularity among over 55s, the Government may feel it must respect the triple lock or risk alienating core voters.

He said: ‘For a government already struggling in the polls, breaking three locks on the state pension in its second year of operation would be a very high-risk strategy and I would be surprised. if they don’t pay the full inflation link – especially very close to an election. ‘

However, Webb argues that the government may be less inclined to do the same for other interests such as General Credit.

*Seasonally adjustable: How the state pension has been determined under the third term over the years.

He added: ‘I think they’re going to feel they can’ get out of ‘a rise in under-inflation; they will say the cash increase is still relatively large (probably 5-6%), and if that’s what everyone working is getting then paying the same for benefits only is “fair”.

‘Politically, they will likely feel that they have fewer core constituencies among working-age beneficiaries than those on state pensions.

‘If they want to save billions to fund tax cuts, the DWP is the biggest Spending Department so it looks like they will most likely be asked to contribute multi-billion pound savings.’

What could an inflation-related increase mean for retirees?

Inflation will be at its highest this year, so state pension increases should be dictated by September CPI figures, scheduled for October 19.

Inflation in August, announced last week, was at 9.9%, down from 10.1%. The latest earnings growth figure, based on gross pay including bonuses, is 5.5%.

But older adults waiting to find out the state pension increase they will receive next April could find it still lagging behind prices, with inflation still trending upwards.

This year, sky-high inflation is severely affecting pensioners who are struggling to pay family bills.

If the 9.9% inflation rate from August were used, those on the post-2016 state full rate pension of £185.15 a week or around £9,600 a year would rise to 203, £50 a week or £10,600 a year.

Those following the old base rate will see a jump from £141.85 a week or around £7,400 a year to £155.90 or £8,100 a year.

How much is the state pension?

The basic state pension is currently £141.85 a week, or around £7,400 a year. It is supplemented by additional state retirement benefits – S2P and Serps – if accumulated over working years.

The two-tier state system was replaced in 2016 with a new ‘fixed rate’ state pension. This is currently worth £185.15 a week or around £9,600 a year.

Those who have contracted with S2P and Serps for many years and retire after April 2016 will receive less than the full new state pension.

But they can fill in gaps in National Insurance that have not been paid and/or have not been paid in previous years, voluntary top-ups to buy more qualifying years, and accrue additional years if they have enough time. between now and state pension age.

Workers need 30 years of National Insurance contributions to qualify for the old state pension, but they now need 35 years of contributions to receive the new state fixed rate pension .

But even if you’ve paid in full for the full 35 years, if you sign on for a few more years, it could still reduce what you get.

Everyone has the option of deferring their state pension to receive more in their later years. You can check your NI profile here.

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