Pensions triple lock scrapped for millions of Brits
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The suspension to the triple lock combined with high rates of inflation has left pensioners concerned over the value of their state pension. An expert has warned that “retirement wealth is under threat”.
The triple lock policy ensures that the state pension rises by the highest of three figures every year. These are:
- 2.5 percent
- The rate of inflation
- Average earnings growth
Using average earnings growth would have provided pensioners with an 8.1 percent increase to their state pension from April 2022, but the Government took the decision to remove the earnings link for the 2022/23 tax year.
This was because they determined the large number of people returning to work after the ending of the furlough scheme was artificially inflating the figure.
The rate of inflation was therefore used instead, providing an increase of just 3.1 percent, less than half the level pensioners had been expecting.
At present, the full new state pension is valued at £179.60 per week. This will rise to £185.15 once the increase comes into effect.
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Meanwhile, inflation has ballooned in the months since the state pension rise was locked in, back in September 2021.
It currently stands at 5.5 percent, marking the highest rate seen in 30 years.
If this trend continues, the increase to the state pension could actually be less than the rate of inflation by April.
This means pensioners could be at risk of not being able to keep up with the cost of living.
Jai Bifulco, Chief Commercial Officer of Kinesis Money, discussed the potentially precarious position which pensioners find themselves in.
He said: “Pensions are failing to keep pace with inflation, leaving many pensioners short-changed in later life.
“In short, retirement wealth is under threat.
“The UK is already on the cusp of a crisis with approximately 2 million pensioners in poverty.
“Research shows that the average savings for over 55s is £20,087, which will very quickly diminish.”
Mr Bifulco urged retirees to do what they can to maximise their savings and secure their financial future.
He said: “Pension funds will be working to maximise returns, but pensioners should also take steps to protect their wealth and look to buy assets that are stable in price.
“If pensioners keep all of their wealth in cash savings, they are at the mercy of inflation.
“With more cash being pumped into the economy than ever before, it’s a very fragile situation.”
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