Abandoning the triple block of the state pension would cost retirees £ 22,000

Retirees will be £ 22,000 worse than their retirement if the government refuses to honor its promise of a triple block of state pensions.

New Chancellor Jeremy Hunt has refused to rule out abandoning the policy that protects millions of retirees from inflation.

When asked yesterday in the House of Commons to reaffirm his commitment to the triple block of state pensions, Hunt said he would make “no commitment to individual policies.”

The triple lockout, which Prime Minister Liz Truss promised to restore in her leadership campaign, promises to raise the state pension each April in line with the previous September’s highest inflation rate, wage growth, or 2.5% .

September inflation data, due to be released tomorrow, could show inflation reaching 10%, meaning the state pension is expected to rise to a weekly sum of £ 204 or £ 10,891 per year, according to Asset Manager Quilter Cheviot’s calculations.

The basic state pension, paid to those who reached state retirement age before 2016, would increase to £ 156 per week or £ 8,112 per year.

However, if the government decides to ignore the inflation figure and choose the expected wage growth figure of 5%, an option suggested by Prime Minister Liz Truss should apply to state benefits, retirees would take home just £ 10 in. more per week at £ 194, or £ 10,109 per year, Quilter Cheviot discovered.

The basic state pension would increase by £ 7 per week. The loss of this increase would amount to £ 22,000 when a 66-year-old retiree turns 85, assuming a 2.5% increase in the state pension thereafter, according to Quilter Cheviot.

David Denton of the company said it has become “impossible” to predict the direction of government policy, making it difficult for retirees to plan their retirement.

The triple lockdown policy was first violated by former Chancellor Rishi Sunak in September last year, after layoffs and layoffs during the pandemic skewed wage figures.

The state pension was supposed to increase by 8.1% in April 2022, but the Treasury only opted to raise the inflation figure payment by 3.1%.

Mr. Denton added: “After last year’s increase of just 3.1%, retirees will see their spending power quickly swallowed up by rising inflation and many will struggle to keep their heads above water. .

“This increasingly unpopular government faces a tough decision as Mr. Hunt tries to balance the scores. Keeping rising inflation underway would provide a huge boost to retirees’ income at a time when many are struggling. ”

According to the Royal London pension fund, half of retirees rely on state subsidies as their main source of income. Tom Selby, of broker AJ Bell, said the triple lockout has been extremely valuable to many retirees in the midst of a “brutal” cost of living crisis.

“The costs associated with maintaining triple-lock next year are likely to be staggering, which is why Chancellor Jeremy Hunt is reluctant to engage in politics.”

Mr. Selby added that estimates from the Bureau of Budgetary Responsibility suggest that each percentage point increase in the state pension costs the Treasury around £ 1 billion.

“With such a measure, moving from an inflation link to an earnings link would save the Chancellor £ 4 billion to £ 5 billion a year,” he said.

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