Thu Oct 17, 2019 1:32 am
Pensioners will get a near-4 per cent hike in their state pensions from next April, matching the rise in average earnings seen by workers in recent months
That means the basic state pension is set to rise by £5.05 a week to £134.25, while those on the full flat-rate introduced in 2016 will see their payouts increase by around £6.60 a week to £175.20.
A 'triple lock' guarantee on annual rises in the state pension means they are decided by whatever is the highest of price inflation, average earnings growth or 2.5 per cent.
From next spring, the rise will be in line with earnings growth of 3.9 per cent recorded in July - more than double the rate of inflation in September, which has just been confirmed at 1.7 per cent.
News of the increase will reignite the debate about whether the triple lock is too generous and if the cost is sustainable to today's workers who fund it via National Insurance contributions.
But the pending election might scupper any fresh attempt to ditch the popular policy.
At the last election in 2017, the Conservatives threatened to end it in 2020, but it was saved under the party's deal with the Democratic Unionist Party.
'Such a bumper increase clearly comes at a cost to the Exchequer, and with a general election seemingly inevitable the commitment of politicians to this policy is likely to be tested,' said Tom Selby, senior analyst at AJ Bell.
'It is likely the issue will become weaponised in the cauldron of an election battle as politicians desperately seek voter approval.
'Given older people usually head to the ballot box in the greatest numbers, it is extremely unlikely any party will propose significant changes to this popular policy in their respective manifestos.'
Former Pensions Minister Steve Webb, now policy director at Royal London, warned the state pension increase has a sting in the tail for over-75 who will lose the right to free TV licences next summer.
'Next June those not on pension credit will be required to pay for a TV licence rather than receiving it for free. The current cost of a TV licence is £154.50 per year and will rise again next year,' he pointed out.
'Royal London has calculated that, taking account of the loss of free TV licences, 1.7 million single pensioners over 75 will face a cut in their real living standards next year.
'This is because their pension increase, once the TV licence has been deducted, will be just 1.6 per cent - lower than today’s rate of inflation which was 1.7 per cent.
'This makes it all the more important that older pensioners check if they might be entitled to claim pension credit so that the poorest pensioners do not face this squeeze.'
Thu Oct 17, 2019 1:39 am