State pension: Savers told 3.1% rise is fair despite inflation – ‘You should contribute!’

The state pension is poised to increase by 3.1 percent next year in line with inflation. It will be the third-highest increase to the state pension in the last decade, earning up to an extra £288 for the year. However, this is still less than half of what they were expecting. The triple lock, which guarantees that the state pension rises in line with inflation, average earnings or by 2.5 percent, was suspended for a year. Average earnings have been distorted by the pandemic, rising by 8.3 percent.

Such a big rise for the state pension was seen as unfair, so the Government opted for a double lock, meaning it will now rise by 3.1 percent.

Some fear this increase won’t cover the rise in prices going into next year, as the Government predicts that inflation will average at four percent next year.

The Bank of England’s chief economist was even more pessimistic last week, warning inflation could soar to five percent.

Nimesh Shah, CEO of Blick Rothenberg, tells that the 3.1 percent increase is still fair.

He said: “It costs a huge amount which is why they did it. It was unfair that they brought in this health and social care levy, which hits workers and not pensioners.

“The measure to bring down the increase on the state pension was there as a neutraliser.

“This is only for one year as well, from April 2023 they will go back to the old system.

“So should pensioners get a higher increase than 3.1 percent this year? I think the answer is no, they need to make a fair contribution given some workers aren’t seeing an increase in their wages at the same level.

“We saw as well that NHS workers are only going to get a three percent increase on their public sector pay.”

Former pensions minister, Steve Webb, told earlier this month that pensioners will endure a squeeze on living standards next year.

He said: “The actual number they use is the September inflation figure. If it’s around three percent in September, that doesn’t mean to say that it won’t rise to five percent later down the line.

“This is important because I think we will see a squeeze on pensioner living standards next year. If you get a three percent rise, but by next April bills go up, your cost of living may have gone up by as much as six percent.”

READ MORE: Pension Budget changes in FULL – what Rishi Sunak’s announcement mean

“But they were much firmer than I expected, they quite clearly said we will reinstate it.

“Secondly, it’s not like it will be after an election when we get to find out whether they keep this promise. We will get to see before we vote again.”

Pensioners will miss out on an average of £2,600 each over the course of five years because of the suspension of the state pension triple lock, while the Treasury will save a total of £30.5 billion.

Figures released with Budget documents show that the department will save £5.415 billion in 2022-23 because of the decision to pursue a double lock for a year, rising to £5.780 billion in 2023-24, £6.115 billion in 2024-25, £6.455 billion in 2025-26 and £6.73 billion in 2026-27 — an overall total of £30.495 billion.

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