Chancellor of the Exchequer Rishi Sunak will be facing questions in Parliament today. He and the rest of the Government are under pressure to combat the cost of living crisis, with prices on all kinds of essentials skyrocketing. The Bank of England predicted that inflation would spike from 5.5 percent currently to 7.25 percent in April because of the energy price cap hike. Because the Government announced last year that the triple lock will be suspended for the next financial year, the state pension is set to increase by 3.1 percent, in line with September’s inflation figure.
However, with inflation in January reaching 5.5 percent and expected to rise further, those on the state pension will endure a real-terms cut to their income.
As a result, retirees in Britain face the worst disparity in their state pension payments when set against inflation since the triple lock was introduced over a decade ago, according to Quilter.
As state pensioners brace for rising living costs, one saver told the i newspaper this month that a £200 energy bill rebate plan won’t help.
They said: “What the hell use is that to anyone?
“By then, thousands of people will have… lost their homes through debt, or died from the cold. Hasn’t anyone told him [Rishi Sunak] that the crisis is now and not next winter?”
Rising prices are also forcing older people to “make choices every day between whether to put the heating on, or to boil the kettle or to skip a meal”, campaigners told MPS on the Work and Pensions select committee.
Speaking to This Is Money, various experts explained how inflation and the triple lock suspension will hit savers.
Jon Greer, head of retirement policy at wealth manager Quilter, says: “For those retirees who rely solely on the state pension, this kind of reduction in the real value of their payments will hit them hard, especially against a backdrop of rising food and energy prices.
“While this could prove to be a difficult year for many pensioners, there should at least be light at the end of the tunnel next year when the next state pension increase is based on the inflation that we are experiencing.”
Helen Morrissey of Hargreaves Lansdown recently spoke to Express.co.uk and urged Britons to take advantage of Pension Credit to try and lessen the blow dealt by rising prices.
She said: “With regards to those who are dependent on the state pension, a really important thing to consider is Pension Credit.
“It’s there to top up the income of the poorest pensioners and it also acts as a gateway to other benefits.
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“You can get help with NHS treatment, if you are over 75 you can get a free TV licence, there’s various other things which can have a massive impact over a long period of time.
“The thing with Pension Credit as well is that it is a really under-claimed benefit, a lot of people don’t recognise that they are eligible for it.
“Only something like six in 10 people who could claim it actually do.
“That’s something that anyone who is eligible should look at because it could make a massive difference for them.”
As a result of the triple lock suspension, the gulf between the payments made to savers and inflation is the highest it has been since the triple lock was introduced.
Since the triple lock was launched in 2010, there have only been 22 months when inflation stood above the uprating of the state pension for the previous April and five of those months were in 2021, says analysis by Quilter.
The previous biggest disparity was 0.6 percent back in November 2017, when inflation ran higher than the state pension uprating for 11 months, but only on average creating a disparity of 0.4 percent over the period, the financial firm found.
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Mr Greer added: “We are in a fiscally unique time, with a cost-of-living crisis biting and inflation steadily increasing.
“This is causing financial hardship throughout society and unfortunately pensioners are far from immune from it and will see their state pension payments suffer a real term loss.”
A Government spokesperson defended the decision to abandon the triple lock.
They told This is Money: “We know this has been a challenging time for many people, which is why we’re providing support worth around £12billion this financial year and next to help households across the country with the cost of living.
“A further £9billion was announced by the Chancellor to protect against the impact of rising global energy prices. Combined with last year’s 2.5 percent increase to pensions, we have ensured pensioners’ incomes have been protected.”
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