The state pension and certain benefits have risen by 3.1% from Monday, April 11, but economists have warned the uplift is not enough to offset the cost-of-living crisis. Rises are based on the consumer prices index (CPI) measure of inflation calculated in September last year but current inflation levels are 6.2% and expected to hit more than 8% later this year due to soaring energy bills.
The changes mean the basic state pension will rise by £4.25 a week to £141.85 a week, with the full state pension going up £5.55 a week to £185.15. A single person aged 25 will see their universal credit allowance rise from £324.84 to £334.91 a month, or £4,019 a year, and child benefit rises 68p a week for the eldest child.
Disability allowance is also going up by 3.1% and will automatically change for recipients. But Tom Selby, head of retirement policy at investment firm AJ Bell, warned: “When is a pay rise not really a pay rise? When the cost of the things you buy are increasing by more than the extra cash you’re receiving.
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“Sadly, that is exactly the position millions of retirees find themselves in today as the state pension rises by 3.1% – exactly half the 6.2% CPI inflation figure recorded in February this year.” He pointed out that Chancellor Rishi Sunak scrapped the triple-lock guarantee because the price tag of £5 billion was deemed too high.
Mr Selby added: “Had the triple-lock been retained and an 8.3% earnings-linked increase applied, someone in receipt of the full flat-rate state pension would be seeing their weekly income bumped up to around £194.50 today.” His comments come as a new survey found that one in eight Britons are delaying retirement for up to 10 years due to debt.
Credit management company Lowell found that 21% of people are worried that their pension will not be enough to live on when they retire. One in six said they are delaying retirement for up to five years because they are in debt and 12% are delaying for at least 10 years.
Costs have risen significantly for all households and are soaring further from this month as the Government’s energy price cap rises 54% to keep pace with rising wholesale gas prices. Increasing oil prices and supply chain issues linked to the Russian invasion of Ukraine are expected to push inflation up further, with food prices likely to be affected.
To offset some of the pain, the Chancellor announced a 5p-a-litre cut in fuel duty and a council tax rebate for houses in bands A to D, along with offsets to energy bills that are due to be paid back from next year. James Jones-Tinsley, self-invested pensions technical specialist at Barnett Waddingham, said: “As the cost of living spirals and fuel bills skyrocket, those living off a pension will need to dip into savings in order to supplement their income – and dip much deeper than they would have done had the triple lock remained in place.
“While the 3.1% rise looked both fair and reasonable last October, the prevailing rate of inflation means it looks derisory today. The Chancellor could step in, but in the spring statement did little to rectify the situation – most pensioners spend more on heating than petrol, and are unlikely to be wowed by corporate tax cuts and R&D investment.”
Last month, economists appearing before MPs on the Treasury Select Committee said they were surprised that more had not been done to support those who were not in work. Torsten Bell, chief executive of the Resolution Foundation think tank, said: “I was very surprised that the Chancellor had chosen the overall package he had when it came to what was on offer for lower-income households.”
He pointed out that lower-income households will feel the pressure from rising energy bills – which is driving inflation. The economist added: “It is an odd choice to have offered basically next to nothing to those households in this spring statement. I didn’t think he would do that and I was wrong.”