Earlier this week, Chancellor Rishi Sunak confirmed that the triple-lock would be reinstated next year after a one-year temporary suspension. The triple lock is a government promise to increase state pension payments at either the average income rate, inflation, or 2.5 percent; whichever is higher. As a result of the suspension, the state pension rate rose only 3.1% last year in line with inflation from September 2021.
However, the inflation rate is currently at its highest level in 40 years at nine percent and is expected to reach ten percent in the coming months.
Emma Byron, managing director of Public and Legal Retirement Solutions, explains why the triple lock is an essential component of the state pension payment system.
Ms Byron explained: “As the cost of living crisis continues to unfold, this decision is good news for the many people who depend on the state pension to meet their income needs.
However, it serves as a powerful reminder that state pensions are hard to predict.
Read more: Couple in shock as they realize they spent £2,000 on just one trip to the museum
As a result, consumers must ensure that they allocate their own savings as well, in order to ensure a good standard of living in retirement.
We’ve seen a slight increase in people withdrawing from their personal pension earlier and at higher rates, possibly because income is under pressure.
“This is something we are watching closely but hopefully the ‘triple lock’ re-lock will provide some reassurance and help people who are struggling to make ends meet.”
In response to the dire financial situation many families are facing, the government recently launched a series of financial support payments to support retirees with recent increases in inflation.
do not miss:
Those receiving tested benefits payments, such as Universal Credit, are entitled to a one-time payment of £650 cost of living.
On top of this, retirees will automatically receive a payment designed just for them which will come to £350.
In addition, the government has announced a blanket discount on energy bills of £400 that will replace the ‘buy now, pay later’ loan introduced earlier in the year.
This means lower-income pensioners can claim upwards of £1,500, according to a pension expert.
Stephen Cameron, Director of Pensions at Aegon, said: “Those who receive state pensions will be relieved to hear the chancellor announce new targeted support measures to help them weather the pressure of living costs this winter.
The government says families of low-income pensioners can receive a total of £1,500 in one-time additional support payments this year.
“Of this amount, £650 will be paid out to those who receive the pension credit, so it is more important than ever that those entitled to this benefit make sure they claim it. In the event that pension credit is not received, the additional support is up to £850 sterling.
The state pension increased in April by only 3.1 percent, after adjusting the triple lock equation, which is much lower than the inflation rate, which is now nine percent.
“Had the state pension been increased by this amount, a person entitled to the full rate would have received a weekly government pension of £195.75 a week, £10.60 above the actual level of £185.15. This leaves the purchasing power of the individual at 551.20 £1 per year less.
“The good news is that a £1,500 payment to the families of the poorest pensioners will more than offset this, even in families with two pensioners. For those not receiving pension credit, £850 would also be a welcome payment.”
Retirees will be reassured by further affirmation of the government’s commitment to re-locking triple state pensions. If the inflation rate in September is ten percent, this means an increase in the state pension by £18.50 per week from April 2023.”