22 November 2023
If you are covering uprating of the state pension and benefits remaining the same at the Autumn Statement, please see the following comment from Jon Greer, head of retirement policy at Quilter:
State pension
“Tinkering with the triple lock measure will be something the government would have been loathed to do given it will upset the Conservative party’s core voters. Being able to announce they are keeping the measure as is today will therefore represent a boon for Hunt and Sunak. This will set the uplift for next year’s full State Pension payment (for those reaching state pension age from 6 April 2016), which will increase to £221.20 per week, or £11,502.40 per year. This level of uplift follows the inflation matching 10.1% boost that saw the 2023/24 state pension rise to £203.85 a week, or £10,600 annually.
“However, once again the triple lock and all its problems gets punted down the road for the next government to think about. There is a growing problem with the state pension and it’s unfortunate but not unsurprising that this government have not opted to make long term but potentially unpopular decisions about reforming how our state pension is uprated.
“The potential reform of how the state pension is calculated requires a delicate balance between protecting the income of retirees and ensuring the long-term sustainability of the pension system. The triple lock, which ensures that pensions rise by the highest of average earnings, inflation, or a minimum of 2.5%, has been crucial in safeguarding pensioners' income. However, this system can be financially unpredictable and may not be sustainable in the long run.
“A more sustainable approach could involve linking pensions to a fixed percentage of average earnings. This method would align pension increases with the economic prosperity of the country, ensuring that pensioners' incomes grow in tandem with the working population. It also offers more predictability for budgetary planning and could be perceived as a fairer system, especially for younger generations who currently contribute to the pensions of retirees. Transitioning to such a system, however, would require careful consideration and planning to protect current retirees while laying a sustainable foundation for future generations so it is unsurprising but disappointing that Hunt has not tackled this issue.”
Benefits
“Traditionally, welfare benefits, much like state pensions, are adjusted annually based on the previous year's inflation up to September. This method ensures that while there is a lag in adjusting to current inflation rates, the real value of these benefits eventually aligns with economic conditions. If they had moved the measurement month to October, the government would have effectively excluded the typically higher inflation of September from its calculations. This exclusion, especially in times of high inflation like September 2022, would have meant that the uprating may not fully compensate for the increased cost of living, leading to a de facto reduction in the real value of welfare benefits. Over time, this can amount to a considerable reduction in support for those reliant on these benefits. It is therefore good news that they have kept the original uprating measure in place.
“Maintaining a welfare system that adequately supports those in need, particularly during times of economic hardship is of utmost importance. Had the decision to change the uprating measure to October's inflation rate mean made it would have overlooked the fundamental purpose of welfare benefits – to provide a safety net for the most vulnerable in our society."
