State Pension rise – how much YOU could get in changes tomorrow
State pension ‘not enough’ to retire on says financial advisor
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The State Pension triple lock is a Government policy that has been in place since 2010 and guarantees that the value of the nation’s pensioners increases each year. Due to the way the triple lock works, keeping it in place would have led to an artificially inflated rise in the State Pension.
Its aim was to help pensioners maintain their spending power as the cost of living rises.
The triple lock acted as a guarantee for the basic State Pension, ensuring it will rise by a minimum of either 2.5 percent, the rate of inflation or average earnings growth – whichever is highest.
In a recent assessment, the Institute for Fiscal Studies (IFS) said: “Between April 2010 and April 2016 the value of the State Pension has been increased by 22.2 percent, compared to growth in earnings of 7.6 percent and growth in prices of 12.3 percent over the same period.”
This equates to pensioners getting an income raise by almost double the pace of the average worker.
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The decision was taken because the Government believed average earnings growth was being artificially inflated due to many people coming off the furlough scheme and returning to work – a move the Government saw as unfair to working people.
The removal of the policy is thought to save the UK about £4billion each year.
The value of the State Pension for the 2021/22 tax year will be confirmed tomorrow, as the rate of inflation – which is an element of the triple lock – will be announced.
The new ‘double lock’ system, as it has been dubbed, will allow the State Pension to rise by either the inflation rate or 2.5 percent – whichever of these is higher.
How much extra will pensioners get?
If the State Pension rises by 2.5 percent, pensioners will get a boost of approximately £4.38 per week, to £179.58.
Over the course of a year, pensioners would get an additional £227.76.
However, the accurate amounts will be announced by the Treasury tomorrow, Wednesday, October 20.
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The decision to change the triple lock for the upcoming fiscal year has been unpopular with pensioners, according to a recent survey.
A survey by NerdWallet found 52 percent of those aged 65 and over found the decision to suspend the policy made them less trustful of Government pension policy.
If the lock has been kept in place, it would have risen by eight percent – which would have added billions to the Government’s pensions bill.
The survey found support for suspending the bill was highest in the 18-24 age group, with 40 percent agreeing with the scrap, and lowest among the 45 to 54 age group, with only 19 percent in agreement.
Overall, more than a third of respondents – 35 percent – said suspending the triple lock on pensions has left them worried about the impact it will have on their future retirement income.
Richard Eagling, senior pensions expert at NerdWallet, said: “The triple lock is an expensive commitment for any government to carry but it has enjoyed strong public support since it was introduced in 2011.
“Fear of voter reprisals has left the government wary of altering the triple lock to try to rein in such liabilities, and these concerns are not unfounded.
“Suspending the triple lock has undermined confidence in the Government’s pension policy and left many questioning whether more permanent changes could be on the cards.
“A significant number of individuals are coming to the conclusion not to overly rely on what the state pension might deliver and are now looking to step up their own pension provision to increase their chances of enjoying a decent income in retirement.”
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