State Pension payments have risen by 3.1% in line with the Consumer Price Index rate of inflation in September 2021, instead of the 8% boost that would have happened if the Triple Lock policy had not been suspended due to the increase in earnings, which was deemed to be unfairly inflated by the coronavirus pandemic.
The 3.1% increase means that the basic State Pension has now risen to £141.85 per week from £137.60 and the full new State Pension has gone up to £185.15 from £179.60.
State Pension currently provides essential financial support for over 12.4 million older people across the UK, including 981,399 retirees living in Scotland.
Inflation has now soared to 6.2% and is expected to go even higher as the prices of food and energy are rising even more quickly, leaving many older people struggling financially.
Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, said: “Pensioners are bracing themselves for a tough time ahead as soaring inflation takes enormous bites out of their purchasing power. This year’s 3.1% increase in State Pension is no match for inflation that currently stands at 6.2% and is set to go even higher in the coming months.
“Many pensioners will have other sources of income they can draw from but those largely, or wholly reliant on the State Pension will certainly struggle, especially as they spend a greater proportion of their income on the things that are rising steeply - energy and food.”
However, Helen pointed out that if high inflation sticks around for the rest of the year and then starts to fall back, older people could get a good increase next April, but that this is little comfort to those struggling now.
An increase of 8% next year would see those on the full, new State Pension receive £199.95 per week and those on the older, basic State Pension receive £153.20.
The Department for Work and Pensions (DWP) recently launched a new campaign urging people over State Pension age on a low income to check if they qualify for Pension Credit.
This benefit tops up the income of single pensioners to £182.60 per week and £278.70 for a couple.
It is also a gateway benefit to other means of support such as help with bills, housing costs, Council Tax and people over 75 can also qualify for a free TV licence.
It is a hugely helpful, but massively under-claimed benefit with only around two-thirds of people who can claim it actually doing so.
You can qualify for Pension Credit if you own your own home or have some savings, so it’s worth checking to see if you are eligible - find out more here.
Helen continued: “Those who have pension income beyond the State Pension also face tough choices and need to plan ahead wherever possible.
“Those who purchased an inflation linked annuity will see their income increase year on year in line with inflation but those who purchased a level annuity won’t. Retirees in drawdown may be considering taking more income from their pot this year in a bid to cover their increasing expenses.
“However, this puts them at risk of depleting their capital and may mean they need to cut back in years to come.”
She added: “Wherever possible it is a good idea for retirees to have a cash buffer of one to three years’ worth of essential expenditure so they can supplement their income in times such as these when purchasing power is under pressure.”
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