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Stubbornly high inflation ‘could pave way for state pension boost next year’
26 June 2023, 15:44
Under the triple lock, the state pension is uprated in April by inflation, wages or 2.5%, whichever is higher.
Stubbornly high inflation could pave the way for another bumper state pension boost next year, if the “triple lock” is maintained, according to a finance expert.
September’s inflation figure is used to help calculate the triple lock, and projections indicate that Consumer Prices Index (CPI) inflation could still be sitting at around 7% this autumn.
Under the triple lock, the state pension is uprated in April by inflation, wages or 2.5%, whichever is higher.
Alice Guy, head of pensions and savings at interactive investor, said that if inflation is around 7% in September and the state pension is subsequently increased by 7%, this could potentially take the new state pension from around £10,600 per year to around £11,342.
The triple lock was previously temporarily suspended due to distortions in wage growth created by the impacts of the coronavirus pandemic; however it was later reinstated and in April this year pensioners received a 10.1% increase.
Ms Guy said: “Pensioners could be due another bumper state pension hike next year, with inflation proving a much tougher nut to crack than the Bank of England hoped.
“Their May forecast predicts inflation will fall slightly from its current rate of 8.7% to 7% in September, the key date for deciding the state pension for next year.
“The state pension forms the backbone of most people’s pension income and a rise in the state pension will be a lifeline to many people on the breadline.”
Ms Guy added: “Pensioners are one of the most vulnerable groups to rising prices as they have limited options to boost their income. If you have an elderly relative who’s struggling on a low income, then it’s worth checking if they’re entitled to any benefits like pension credit.”
A Department for Work and Pensions spokesman said: “As is the usual process, the Secretary of State will conduct his statutory annual review of benefits and state pensions in the autumn, using the most recent prices and earnings indices available.”