State pensions will rise by £290 in April, adding up to £5.50 a week for those who retired after 2016, the DWP has said. The new measures will come into force later this year, in line with September’s Consumer Price Index (CPI) inflation rate of 3.1 per cent, reports the Mirror.
It’s a drop on the 8 per cent pensioners would have got if the Government kept its triple lock promise to increase the state pension each year by the highest out of average earnings, 2.5 per cent, and inflation. Instead, it will rise by 3.1 per cent, far below a 30-year high in inflation – a measure of how fast prices increase.
A 3.1 per cent rise means those on the full new state pension will see their annual income jump to £9,628.50 – an extra £289.50. Retirees can choose to receive their payments either weekly or monthly. Choosing to receive the payment every four weeks differs from being paid monthly as the DWP makes 13, four-weekly payments each year over a 52-week period which can result in two payments being made in the same calendar month.
The decision was confirmed after the Social Security (Up-rating of Benefits) Act 2021 received Royal Assent in November. Under the temporary ‘double lock’ rule, the state pension for the 2022/23 financial year is based on the greater of either annual inflation or 2.5 per cent.
A spokesperson for the DWP said: “In taking this decision, the [UK] Government carefully considered the fairest approach for both pensioners and younger taxpayers, many of whom have been hardest hit by the financial impacts of the pandemic. In addition, last year, we delivered primary legislation to increase State Pensions by 2.5 per cent, when earnings fell and price inflation increased by half a percentage point. If we hadn’t taken this action, State Pensions would have been frozen.”
However, with an energy crisis sending gas prices up 54 per cent from April, analysts have warned pensioners will struggle to afford the cost of everyday goods. The Bank of England has previously warned inflation could reach 5 per cent by April when the 3.1 per cent rise kicks in. That’s in response to supply disruption and energy price rises.
The Centre for Economics and Business Research (CEBR) previously estimated this will leave Britain’s elderly £169 worse off in real terms. CEBR economist Sam Miley said: “Pensioners will be particularly vulnerable to rising prices, due to the fact that their disposable incomes tend to be lower in the first place. Meanwhile, the nature of inflation at present, being heavily concentrated in utility prices, is also set to adversely affect pensioners, given that this makes up a relatively larger proportion of their overall spending.”