- From 11 April the state pension increases by 3.1%. This gives someone on a full new state pension £185.15 per week and someone on a full basic state pension £141.85.
- Under the triple lock pensioners had previously been in line for an increase of more than 8% in line with earnings data. However, this was seen to be unfairly inflated by the pandemic and so the triple lock was suspended.
- The 3.1% increase was awarded as that is what CPI inflation was in September 2021. It has since soared to 6.2% and is expected to go even higher.
- The prices of food and energy are rising even more quickly leaving many pensioners struggling.
Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown:
“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.
If high inflation sticks around for the rest of the year and then starts to fall back, pensioners could get a good increase next year, but this is little comfort to those struggling now. Pensioners on a low income should check to see 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 and NHS costs. People over 75 can also qualify for a free TV licence.
It is a hugely helpful, but massively underclaimed benefit – only around two-thirds of people who can claim it actually do. You can qualify for Pension Credit if you own your own home or have some savings, so it is worth checking to see if you are eligible.
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.
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.”