State pension increase branded ‘not a bad amount of money’ – do you agree?
Budget 2021: Experts outline state pension changes
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This follows the decision to suspend the triple lock which was supposed to ensure state pension payments would rise by the highest out of the rate of inflation of average earnings, the rate of inflation of consumer goods, or 2.5 percent. However, the government ended up breaking their manifesto pledge to protect this triple lock system and have temporarily replaced it with a double lock system.
The rate of earnings increased by a record high of 8.8 percent due to the post lockdown recovery period so the government could not use these figures in line with the state pension rise, as it was suggested they are artificial.
As a result, the state pension will increase in line with inflation, but many pensioners argue this is not enough.
On the Which? Money podcast however, money expert Gareth Shaw stated that the 3.1 percent increase to state pension is “not a bad amount of money”.
He said: “State pension is going to increase by inflation and that doesn’t mean it’s not a significant number.
“Most people in reality get more or less than that based on their working history but that is the flat rate.
“That is a £288 increase across a year and that brings the state pension to £9,627.80 across a 12-month period.
“So, it’s not a bad amount of money to have.
“Yes, we have a double lock, but it doesn’t mean that the government hasn’t been generous when uprating the state pension this.”
During the Autumn Budget, the Chancellor Rishi Sunak confirmed the suspension of the state pension triple lock.
Despite pensioners receiving an extra £288 a year, this still less than half of what they were expecting.
Furthermore, changes in National Insurance will mean pensioners in work will now need to pay a 1.25 percent levy next year to help fund the NHS social care crisis.
Traditionally pensioners stopped paying National Insurance once they hit state pension age, however this has changed as National Insurance contributions are rising for those still in work.
The National Insurance hike will cost Britons working hundreds of pounds every year.
Money expert Jenny Ross explained how much the hike will cost specifically.
She said: “Those earning £20,000 a year, you will be paying an extra £130.
“If you’re earning an extra £50,000, you will be paying an extra £500.
“It’s not small change, you will notice the difference.
“People working beyond state pension age, which is currently 66, will have to pay that 1.25 percent levy. So yeah, it’s huge.”
By increasing the rate of National Insurance, the Prime Minister has broken a pledge from his 2019 election campaign, when he stated that it would not be increased.
Mr Johnson accepted that he had broken his promise but said that it was a necessity due to the continuing financial impact of the COVID-19 pandemic.
He said that breaking a manifesto pledge is “not something I do lightly, but a global pandemic wasn’t in anyone’s manifesto”.
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