UK Consumer Price Index (CPI) inflation has come in at 3.8% - unchanged for the third month in a row, but still close to double the Bank of England’s target rate of 2%. Forecasters had expected the figure to come in at 4%.
Maike Currie, VP Personal Finance at PensionBee comments: “September’s inflation figure is one of the determinants of next year’s state pension increase under the government’s triple lock.
With earnings growth at 4.8% still outpacing price rises, the full new State Pension is set to rise by £11.05 to £241.30 per week from April.”
Under the triple lock, the state pension increases each April by the highest of: September’s CPI, average earnings growth from May to July of the previous year, or 2.5%.
Currie continues: “The full new State Pension will now be £12,548 a year, only £22 below the frozen personal allowance (£12,570) - the amount you can earn tax-free each year.
While not every pensioner receives exactly this amount, many retired pensioners on the full new State Pension could find themselves paying income tax on it the following year.”
Today’s confirmation of the level of the state pension next year under the triple lock guarantee, is also likely to reignite long-running debates about intergenerational fairness and whether it is sustainable.
Currie explains: “The triple lock has become a focal point in the growing generational divide surrounding the policy, with PensionBee research revealing a sharp generational difference in opinions about its future.
“An ageing population and increasing life expectancy, combined with the generosity of the triple lock, place significant pressure on the UK’s public finances.
“Predicting future state pension costs is difficult under this system, which depends on the highest of three metrics - two of which can fluctuate considerably over time.
Today’s figures simply underscore the fiscal tightrope Chancellor Rachel Reeves must walk ahead of the Budget on November 26.”
