19 October 2022
If you are covering the latest UK inflation statistics and the possible state pension triple lock uplift, please see the following comment from David Denton, technical consultant at Quilter Cheviot:
“This morning’s UK inflation figure for September should in theory mean the State Pension sees a 10.1% uplift for the 2023-24 tax year, taking the full new State Pension (for those reaching state pension age from 6 April 2016) payment to £203.85 per week, or £10,600.20 per year. This level of uplift would be at an additional cost to the Treasury of £9.59bn for the year.
“However, it has become almost impossible to predict the direction of travel of government policy, which means it is very difficult for pensioners to plan with any kind of certainty. Former Chancellor, Rishi Sunak, had backed keeping the triple lock in place and during her leadership bid, Liz Truss also gave the impression that the State Pension triple lock will remain in place. The policy has now been thrown up in air again after Jeremy Hunt appeared indecisive on the matter.
“The triple lock ensures that the State Pension is guaranteed to be uprated each year by wage growth, inflation or 2.5%; whichever is higher. If the triple lock was scrapped in favour of the lower 5.5% average earnings increase, pensioners could expect their State Pension payment to increase to £195.35 a week or £10,158.20 a year, while a 2.5% increase would mean the payment would rise to just £189.80 a week or £9,869.60 a year.
“The basic State Pension, which was paid upon retirement to men born before 6 April 1951 and women born before 6 April 1953, is up to £141.85 per week. This means at the same rates pensioners would receive £157 a week if a 10.1% inflation uplift is confirmed; but they would get a measly £3.55 extra a week at 2.5% or £7.80 at 5.5%.
|
|
Full State Pension |
Basic State Pension |
Additional cost to government (vs 2022-23 tax year) |
||
|
Weekly |
Annually |
Weekly |
Annually |
Annually |
|
|
CPI (10.1%) |
£203.85 |
£10,600.20 |
£156.20 |
£8,122.40 |
£9.59bn |
|
Earnings (5.5%) |
£195.35 |
£10,158.20 |
£149.65 |
£7,781.80 |
£5.21bn |
|
2.5% |
£189.80 |
£9,869.60 |
£145.40 |
£7,560.80 |
£2.37bn |
“The government faces a difficult decision as Hunt steps in to balance the books. Pensioners will be hoping that the government honours its previous commitment to an inflation based uplift next year as it will rely on the high figure released this morning. Not only would this result in a considerable pay rise for pensioners this year, but if the triple lock is then scrapped in subsequent years, they will at least have received this larger, potentially one-off, uprating.
“Last year the government made the controversial decision to ignore the higher wage growth figure which could have seen last year’s State Pension increase hit 8.3% rather than the 3.1% pensioners were eventually granted representing inflation. As such, there is a precedent that they could say inflation is unusually high and choose to discount it – a move that would seriously damage pension income for years to come.
“Thanks to last year’s disappointing increase, pensioners will now be seeing their spending power rapidly swallowed up by soaring inflation and many will be struggling to make ends meet. Committing to the triple lock and keeping the inflation-based increase in place would provide a much-needed boost to pensioner income at a time when many are struggling.”
