UK inflation shot up unexpectedly last month, as vegetable shortages pushed food prices to their highest rate in more than 45 years, according to official figures. The Office for National Statistics (ONS) announced that the Consumer Prices Index (CPI) inflation rose to 10.4 per cent in February from 10.1 per cent in January.
The new inflation figure means that despite a double digit 10.1 per cent Triple Lock increase in April for 12.6million people claiming the State Pension, the uprating will just fail to keep up with rising prices. The Triple Lock determines the level of uprating for the contributory benefit and pays the highest between September’s CPI inflation rate, earnings growth or 2.5 per cent.
Chancellor Jeremy Hunt predicted that inflation might fall to 2.9 per cent by the end of the year, which means if the earnings growth begins to outstrip inflation, the Triple Lock uprating for April 2024, would be based on that.
The earnings figures used are the year-on-year increase for the period May to July and the most recently announced figure here is 5.7 per cent. Based on the assumption the Triple Lock would still be the measure, it could see those on the Full New State Pension receive £215.50 per week from April 2024 (from £203.85), some £815.40 per four-weekly pay period. An annual increase of £46.60.
Those on the maximum Old Basic State Pension would receive £165.10 per week from April 2024 (from £156.20), some £660.40 per four-weekly pay period. An annual increase of £35.60.
However, there is no guarantee the Triple Lock will be used for the 2024/25 uprating due to the soaring costs of providing the State Pension. According to the Office for Budget Responsibility (OBR), the annual State Pension bill for 2022/23 is £110bn, but is estimated to increase to around £148bn by 2027/28.
Steven Cameron, Pensions Director at Aegon, said: “The Chancellor’s Budget last week predicted that inflation might fall to 2.9 per cent by the end of the year, which would be great news for everyone struggling with the cost-of-living crisis. But the increase means we’ll need an even more dramatic fall from today’s position to achieve this.
“For State Pensioners, the Triple Lock, if maintained, would use the inflation rate to this September, which depending on the months ahead, could be far lower, however, it could be that earnings growth begins to outstrip inflation with the Triple Lock then based on this. The earnings figures used are the year on year increase for the period May to July and the most recently announced figure here is 5.7 per cent.”
He added: “Of course, there’s no guarantee that the triple lock will continue to be honoured and this may depend on the movement in both price and earnings inflation in the months ahead.”
Becky O’Connor, Director of Public Affairs at PensionBee, said: “People may have been hoping for some light at the end of the tunnel of ever-increasing inflation, so this month’s data will be disappointing. For pensioners, the rise in the State Pension in a few weeks, from £185.15 to £203.85 a week for the New State Pension and from £141.85 to £156.20 for those on the Basic State Pension, cannot come soon enough.
“For anyone already drawing an income, coping with inflation on a finite pot of money is a difficult and stressful slog. A full State Pension and average private pension pot should be enough to cover the basics in life, like food and heat. But with inflation continuing to go the wrong way, covering the basics remains a challenge for all, but particularly those on low, limited incomes.”
PensionBee has an online inflation calculator to help people work out the impact of inflation on their pension savings - find out more here.
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