State pension in real terms slashed as inflation soars – worth 6% less despite triple lockdown | Personal finance | Finance

According to a new study by the respected Institute for Fiscal Studies (IFS), low-income people are disproportionately affected by soaring food and energy prices, as these absorb a higher proportion of their income. Many are likely to be pensioners living on state pensions, with no personal or occupational pensions to supplement their income.

An inflation rate of 18% is likely to be much higher than the September inflation figure, which will be used to set next April’s increase for old basic pensions and new state pensions as part of the triple locking mechanism.

This means pensioners’ incomes could fall in real terms for the second year in a row, with the most vulnerable being the hardest hit.

Pensioners are already suffering from Chancellor Rishi Sunak’s controversial decision to suspend the triple lockdown for the 2022/23 tax year.

It gave state pensioners a pay rise of just 3.1% from April, while inflation soared to 10.1% in July – more than three times as fast.

It is expected to climb even higher by September, which could give retirees an 11 or 12% pay rise next year.

Some even claim that retirees are spoiledby integrating inflation protection into the triple lock.

Yet this increase would be more than wiped out if inflation reached 18% in 2023 for low-income households.

So even if retirees got a 12% raise, with 18% inflation, they would face an effective 6% pay cut that none of them can afford.

It would be a blow for those who receive the basic state pension, who currently only pays £7,376.20 a yearfor those entitled to the maximum amount (others receive even less).

If this increased by 12%, they would still only receive £8,261 a year. Worse, its purchasing power will be even lower than it is today, because of inflation.

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Worse, some are not even entitled to this amount because they have not paid the maximum national insurance contributions during their working life.

Although they should be able to supplement this with Pension creditit will still not be enough and many of the poorest do not claim.

No wonder more than half of UK adults aged 40 and over felt anxiety about retiring, according to research fund manager Abrn.

The concern is even greater for those who are already retired, with no other means of increasing their income than by joining the growing number of over-65s abandoning their retirement plans and return to work.

Yet many are too old and sick to do so, and will rely on more government support to get them through today’s inflationary hell.



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