The Chancellor will save more than £5.4 billion next year by reducing the rise in the state pension. That means around £400 less in 2022/23 for everyone over state pension age.
You may recall that the Government promised to raise state pensions by what is called the triple lock – that meant the basic and the new state pensions rose each April by the increase in earnings, or prices, or 2.5 per cent, depending on which was highest. But for the April 2020 rise, the Government decided that the increase in earnings of 8.3 per cent was artificially high due to the aftermath of the pandemic, so it limited the rise to whichever was higher of inflation or 2.5 per cent. Inflation for September was 3.1 per cent, and that will be the increase in the state pension from April 2022.
Under those new guidelines, the basic state pension will be £141.85 a week from April, a rise of £4.25; the new state pension will be £185.15 a week, an increase of £5.55. If the Government had stuck to the triple lock and used 8.3 per cent, the rise in the state pension would have been £11.40 a week for the basic and £14.90 a week for the new. Hence the loss of some £400, and that £5.4 billion saving.
The 3.1 per cent rise is not likely to be enough to protect pensioners against price rises. The Chancellor admitted in his recent Budget speech that inflation “is likely to rise further”, adding that the Office for Budget Responsibility (OBR), which advises him, “expected it to
average 4 per cent over next year”. That’s true, but the OBR also said, “We expect CPI inflation to reach 4.4 per cent next year” and warned
it could peak “at close to 5 per cent”.
With gas and electricity bills in Britain up 12 per cent last month (even more in Northern Ireland) and perhaps another 34 per cent in the pipeline, petrol and diesel prices hitting record highs, and the cost of food bills only going up, inflation of 3.1 per cent may seem like a happy memory next April.