State pension warning as retirees set to be worse off next year – ‘a real difference!’
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State pension payments offer important support, and it is for this reason that increases are so vital to retired individuals. However, temporary changes to the Triple Lock mean pensioners will see the earnings component taken out of the equation of increases. Earnings data has been warped due to the pandemic, hence the temporary removal of this element from the policy.
This, however, has been compounded by the issue of inflation – the general rise in prices over time.
With inflation expected to balloon in the coming year, there are concerns about how the state pension will be impacted.
Consequently, analysis states, retirees could have less in their pocket, meaning they will have to make their fund stretch even further in 2022.
Tom Selby, head of retirement policy at AJ Bell, said: “While a 3.1 percent increase in the value of the state pension might feel like good news, with Chancellor Rishi Sunak warning inflation could run at four percent over the next 12 months pensioners are set to feel the pinch from a real term cut in their retirement income.
“If prices rise by four percent then the 3.1 percent ‘increase’ in the state pension next year will feel like a 0.9 percent fall, translating to around £1.20 per week less in real terms for those in receipt of the basic state pension and £1.60 per week less for those entitled to the full flat-rate state pension.
“That might not sound like a lot but for pensioners struggling to make ends meet a £60 – £80 drop in their annual spending power could make all the difference.
“For retirees already set to feel the pinch from rising fuel bills over the winter, a drop in the real value of their state pension will feel like being kicked while they are down.
“From the Treasury’s perspective axing the triple-lock for a year represents a cash bonanza, delivering £5 – £6 billion a year of savings.”
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Yesterday, the Chancellor Rishi Sunak warned inflation is set to average at four percent over the next 12 months.
Some pensioners, then, may be worried about an income cut in real terms and how they will be able to navigate this.
Although the state pension sum is set to increase, pensioners may be disappointed about the removal of the earnings component of Triple Lock – which may have delivered an estimated 8.3 percent increase.
Coupled with the rise in energy prices, there have been concerns that these costs could outstrip the increase pensioners will see next year.
Those who want control over their retirement outcomes have been urged to think carefully about the matter.
AJ Bell has encouraged Britons to save as much as they can as early as they can to ensure they have funds put aside for later life.
Similarly, pension savers can take advantage of matched contributions and tax relief – which serve as incentives to save.
This allows compound growth to boost the sum over the long-term.
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Under current plans, the Government intends to reinstate the Triple Lock next year, and thus pensioners could see a marked increase in 2023 dependent on circumstances.
A Department for Work and Pensions (DWP) spokesperson told Express.co.uk: “We’re committed to ensuring older people are able to live with the dignity and respect they deserve, and later this year we will confirm the new rate for State Pensions.
“The one off decision to temporarily suspend the Triple Lock ensures fairness for both pensioners and taxpayers – while also protecting pensioners’ incomes.”
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