Many people in Britain are currently struggling financially amid a cost of living crisis, not least pensioners. A financial expert has suggested Chancellor of the Exchequer, Rishi Sunak could revise April’s state pension increase as a result.
The Bank of England has predicted inflation could rise to more than seven percent in the coming months, while the state pension is set to rise by less than half that amount.
Laura Suter, head of personal finance at AJ Bell, believes Mr Sunak could announce some forms of financial relief next week.
She said: “Next week’s Spring Statement is only meant to be an economic update, not a full-blown Budget.
“But with a cost-of-living crisis hitting the headlines and people across the country struggling to pay soaring bills for energy, food or petrol, it seems impossible that Chancellor Rishi Sunak will ignore all that and not offer any help to the UK public.”
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The projected 8.1 percent state pension increase was a result of an unusually high average earnings growth rate.
However, the Government decided that an increase to the state pension would not be fair to taxpayers, as they believed the earnings growth figure was being artificially inflated by the number of people returning to work from the furlough scheme.
The decision was therefore taken to temporarily remove the earnings link from the triple lock for the 2022/23 tax year.
Instead, the 3.1 percent rise was announced, in line with inflation for the 12 months to September 2021.
But with inflation skyrocketing in the months since the state pension increase was locked in, Ms Suter believes pensioners have been placed in a difficult position.
She said: “Pensioners relying on the state pension are going to be hit hard in the current cost of living crisis as they are getting a below-inflation increase in their pension payments of 3.1 percent.”
Ms Suter explained that pensioners are a group which spends more of their money on things like energy bills and food, which have seen large price raises.
She suggested that the Government could announce a revised state pension rise to provide some relief to pensioners.
“The Government ditched the triple lock this year as the wage inflation figure was so high, but it could revise the inflation figure it uses for the state pension uplift, to better reflect the current inflationary environment,” she said.
“Interestingly, the latest inflation figures are released on the same morning as the Spring Statement, raising questions about whether an alternative measure of inflation will be generated to base any state pension increase on.
“Currently the 3.1 percent increase in the new state pension will take weekly payments to £185.17, while the basic state pension will rise to £141.87.
“If they instead rose by seven percent, pensioners on the new state pension would see an extra £364 a year, while those on the basic state pension would get £279 a year more.”
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