State Pension: Payment to reach £ 185 per week despite reported end of triple lockdown | Personal Finances | Finance
The state pension is set to rise to £ 185 per week despite rumors of the end of the government’s triple lockdown pledge.
Introduced in 2010 by the coalition government, triple foreclosure is a method of calculating the annual increase in the state pension.
The increasing amounts of the pension fund are determined by the higher of the three options: the country’s average income, the rate of inflation or 2.5 percent.
This month, it was confirmed that average earnings are now highest at 8.8%, while inflation stands at 2.4%.
Due to the financial crisis resulting from the pandemic, the government is reportedly considering removing the triple lockdown for a year in order to save money, with the Times reporting it will introduce a 3% increase.
If this change were to be implemented, a retiree on the state full pension of £ 179.60 would receive an additional £ 5.40, bringing his or her prize pool to £ 185.
In addition, a retiree receiving a basic pension of £ 137.60 would receive an increase of £ 4.15 which would translate into a weekly payment of £ 141.75.
Due to rising wages, which have been artificially inflated following the reopening of the economy, experts called on Chancellor Rishi Sunak to take alternative measures to address the pension problem.
READ MORE: State pension: Sunak could launch ‘double taxation attack’ costing savers £ 2,000 per year
According to LCP pension experts, if the Treasury were to ‘dilute’ the triple lock by introducing a weaker measure of income growth, around £ 850million in state pension spending for every percent withdrawn from l increase would be saved.
The retirement consultants recommend that the government use a measure of the growth of underlying earnings over the past year, thereby eliminating the impact of the pandemic.
Figures from the Office for National Statistics (ONS) suggest this would cut the forecast by 2.4% and 3.8%, saving the Treasury £ 3 billion a year.
On top of that, LCP recommends that the government use profit growth over a two-year period instead of just one to save money.
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Steven Webb, partner at LCP, is wary of the “political judgment” facing Mr. Sunak but believes changes can be made while keeping the “spirit” of the triple lockdown.
“Average incomes are well above where they were a year ago, in part because some workers on leave are back at full pay and also because some lower paying jobs have been completely lost,” he said. he explained.
“These numbers put pressure on the Chancellor as he will want to stick to his triple lockdown policy but not pay a huge increase to retirees, especially at a time when many working-age benefits are on the verge of collapse. be reduced by £ 20 per week.
“This is ultimately a political judgment for the government, but the most likely option remains to seek a measure of earnings growth that eliminates the effect of the pandemic.
“It could save the Chancellor several billion pounds a year while still allowing him to claim that he had kept ‘the spirit’ of the triple lock promise.”
Other experts, including Jon Greer of Quilter, shared similar views to Mr. Webb’s regarding the triple lock.
Specifically, Mr. Greer thinks the government needs to change tact when it treats state pensions out of “intergenerational fairness.”
He said: ‘Giving retirees an almost double-digit increase in their income, purely because of a technical glitch that has resulted from millions of people in the UK cutting their hours or stopping work altogether would seem obtuse from the point of view of intergenerational equity.
“Two potential solutions have been offered: adjust the foreclosure to a two-year average figure for earnings growth or remove the earnings link altogether.
“Those who receive the state pension hope for the former as it could increase their income next year, but a cash-strapped chancellor may well choose the latter.
“Using a two-year average figure will save the government £ 4.1bn compared to if it continued with an 8% increase.
“Using a figure of 2.5% would save £ 5 billion compared to the 8% increase. The additional £ 0.9bn saving may well please Sunak. “
The government’s planned actual increase in the state pension will only be confirmed when the July earnings figures are released next month.