Stubbornly high inflation could pave the way for another bumper state pension boost next year, if the “triple lock” is maintained, according to a finance expert.
September’s inflation figure is used to help calculate the triple lock, and projections indicate that Consumer Prices Index (CPI) inflation could still be sitting at around 7% this autumn.
Under the triple lock, the state pension is uprated in April by inflation, wages or 2.5%, whichever is higher.
Pensioners are one of the most vulnerable groups to rising prices as they have limited options to boost their income— Alice Guy, interactive investor
Alice Guy, head of pensions and savings at interactive investor, said that if inflation is around 7% in September and the state pension is subsequently increased by 7%, this could potentially take the new state pension from around £10,600 per year to around £11,342.
The triple lock was previously temporarily suspended due to distortions in wage growth created by the impacts of the coronavirus pandemic; however it was later reinstated and in April this year pensioners received a 10.1% increase.
Ms Guy said: “Pensioners could be due another bumper state pension hike next year, with inflation proving a much tougher nut to crack than the Bank of England hoped.
“Their May forecast predicts inflation will fall slightly from its current rate of 8.7% to 7% in September, the key date for deciding the state pension for next year.
“The state pension forms the backbone of most people’s pension income and a rise in the state pension will be a lifeline to many people on the breadline.”
Ms Guy added: “Pensioners are one of the most vulnerable groups to rising prices as they have limited options to boost their income. If you have an elderly relative who’s struggling on a low income, then it’s worth checking if they’re entitled to any benefits like pension credit.”
A Department for Work and Pensions spokesman said: “As is the usual process, the Secretary of State will conduct his statutory annual review of benefits and state pensions in the autumn, using the most recent prices and earnings indices available.”
