State Pension 8% Predicted Rise

16.07.2021
Christopher Egmore
Financial Planning

In 2020, the state pension age officially increased to 66; however, recently there has been several news articles and commentary around the government’s triple lock promise and that this could mean an 8% increase in the state pension from April 2022.

This would be very good news for people receiving the state pension, although in more recent interviews, various government ministers have mentioned fairness and that changes may need to occur.

The background to this potential increase is governed by what is known as the ‘triple lock’. This is a Conservative manifesto promise until at least 2024.

This means the state pension increases in line with the rising cost of living seen in the Consumer Prices Index (CPI) measure of inflation, increasing average wages, or 2.5%, whichever of those three is highest.

Current predictions by the Bank of England suggest that average earnings could go up by 8%, hence the equivalent rise in the state pension.

This would cost the Treasury £3bn more than previously anticipated, according to the government's official forecaster - the Office for Budget Responsibility.

Many economists have pointed out this sharp rise in earnings is an anomaly, which has been affected by people coming off the furlough scheme.

The chancellor has said that he would hold "fairness in mind" for any decision that it is made.

Whatever decision is made, careful consideration is needed due to the economic circumstances and the effect this would have on other areas. The government recently received a large amount of criticism regarding the below inflation increase in NHS earnings.

Many industry commentators are urging caution and suspect changes to be considered in the autumn to the triple lock system. 

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