Older Britons are set to brace for the biggest loss of income since 1975, with state pension payments set to fall in real terms in April. This follows a dramatic rise in inflation and the government’s decision to abolish the triple lock on state pension pots which are raising the cost of living for many people across the country. Analysis by The Telegraph Money and Quilter found pensioners will face a reduction in real terms worth £388 a year or £7.45 a week as a result of the changes.
Despite the government’s triple-lock decision, state pension payments are set to rise by £5.55 a week in April.
However, experts warn that this increase will no longer be enough to cope with soaring inflation.
According to the Bank of England, inflation is expected to reach 7.25% later this year.
In 1975, when pensioners last experienced a similar devastating reduction, inflation soared to 21.7% and the annual state pension payment increased by only 14.7%.
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The government has taken the decision to scrap its triple-lock commitment on state pensions as a cost-saving measure following the skyrocketing spending that has taken place during the pandemic.
Thanks to the triple lock, state pension payments increase either by the rate of CPI inflation or average earnings in the UK, or by 2.5%.
Notably, average earnings were artificially inflated due to the furlough scheme which led the government to remove the link to average earnings for this year’s state pension increase.
In April, the Basic State Pension will increase to £141.85 a week and the full rate of the new State Pension will increase to £185.15.
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Worries about rising inflation have been compounded by the unprecedented rise in energy bills and the rising cost of living.
Baroness Ros Altmann, a former pensions minister, has spoken out in favor of older Britons in light of these pressures and is lobbying the government for further help.
Baroness Altmann said: ‘Pensioners don’t seem to be anywhere on the government’s priority list, it’s as if they don’t matter and many will struggle as a result.
Jon Greer of Quilter added: “For pensioners who rely solely on state pensions for their income, this type of reduction in the real value of their payments will hit them hard, especially in a context of rising food prices. and energy.
Quilter’s research found that someone turning 66 in 2022 would lose £9,291 by the time they turn 85, in real terms, due to the impact of inflation on state pensions.
Becky O’Connor, head of pensions and savings at Interactive Investor, explained why older Britons are at risk despite the supposed rise in state pension payments.
Mrs. O’Connor explained; “Although the revaluation of public pensions has largely kept pace with CPI inflation, this is not enough to be convinced that all pensioners are able to cope with the rising cost of living.
“Inflation is a subjective experience and may be different for different households.
“We know, for example, that retirees tend to spend a greater proportion of their overall income on energy and food, so disproportionate price increases in these categories affect them more.
“It is clear that the forthcoming 3.1% increase in the state pension in April will not be enough to support increases in the basic cost of living for elderly households who depend on this benefit, if inflation continues to rise. be significantly higher for the rest of the year.
“In these times of high and rising inflation, given the impact of rising prices for different types of households on rating upgrade decisions, this could lead to a more representative outcome.”
“The choice of measures of inflation is ultimately political, which the ONS itself points out in a briefing note published in 2013 on the ‘Implications of the differences between the consumer price index and the index retail prices’.