The State Pension in the UK is set to have a massive increase in rates.
It has been confirmed that next year payments could rise by as much as £1,000 to match soaring levels of inflation. It comes after pensioners only saw a 3.1% boost in payments this year, reported Birmingham Live.
Pension rises are normally based on a triple lock that sees them go up by whichever is the highest of inflation, average wage increases or 2.5 per cent. But now, a bumper increase is on the cards for 2023-2024, as with the jump in wages at the end of furlough, this would have been the overriding factor of the three and led to pensions going up by 8% this year.
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So the DWP announced last September it would set the wages element aside, and instead use the inflation figure of 3.1 per cent at that time. However, the triple lock is being reinstated for the next financial year and when 2023-2024 pensions are worked out later this year, inflation is set to be the highest of the three criteria in the triple lock, dictating a boost of around 10 per cent.
Under the Bank of England's latest forecast, inflation is set to increase by at least 10 per cent in this year's fourth quarter. A 10 per cent boost would see the New State Pension rise from £185.15 a week to £203.70 a week - over a year, based on 52 weeks, that's an increase of £964.50 from £9,627.80 to £10,592.40. However, only around 2.2 million people in Britain get the New State Pension. The majority - the other 10.3 million pensioners - are on the lower payments of the old Basic State Pension.
With a 10 per cent boost, the old Basic State Pension would go up from £141.85 a week to £156.05 a week - over a year that's a rise of £738.40 from £7,376.20 to £8,114.60 and over £2,000 less than the New State Pension. People usually need a total of 30 qualifying years of National Insurance contributions or credits to get the full Basic State Pension. Otherwise, they will receive even less - but may be able to top it up by claiming Pension Credit.
The Bank of England's Monetary Policy Report of May 2022 makes a projection that quarterly inflation is expected to rise further this year to just over 9 per cent in the second quarter and peak at just over 10 per cent in the fourth quarter, following a further increase in Ofgem's energy price cap this year.
The report said: "CPI inflation is expected to peak at slightly over 10 per cent in 2022 Q4, which would be the highest rate since 1982. The significant majority of that further increase reflects higher household energy prices following the large rise in the Ofgem price cap in April and projected further large increase in October when the cap is next reset; and, to a lesser extent, higher food and goods prices following the war in Ukraine."
Work and Pensions Secretary Therese Coffey had earlier pledged the triple lock would be restored for the 2023-2024 pension calculations. She said: "We legislated to temporarily suspend the earnings part of the triple lock in 2022-23 for one year. As I outlined at the time, that was in response to exceptional circumstances caused by the distorting effects of the pandemic on the earnings statistics. I am again happy to put on record that the triple lock will be honoured in the future." The Prime Minister's official spokesman said: 'The freeze on that was temporary, there are no plans to change that."
The huge boost in pensions comes as public sector workers have been warned not to expect big pay rises to keep pace with inflation. It means those in the NHS, emergency services and education will, like most of those in the private sector, face what is effectively a real-terms pay cut.
Ministers have warned public pay sector restraint is necessary to avoid "spiralling inflation" that could cause greater damage. The Prime Minister's official spokesman said: "The Government has already pledged to increase public sector spending and is awaiting decisions by public sector review bodies. However, ministers made clear the risk of triggering higher inflation must be part of considerations when deciding pay awards this year."
The spokesman did not rule out overriding the decision of the review bodies if they suggest above-inflation rises. "That wasn't the suggestion the Prime Minister said and I don't want to jump ahead of the independent process. You'll know the Government has the capability to do that in the purely hypothetical sense," he said. "The point that ministers were emphasising is that a spiralling inflation will do more to damage people's take-home pay than limited pay restraint."
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