‘Double lock’ pension set for £300 increase

THE state pension is set to rise by more than £300 a year, according to new analysis carried out by The Mail on Sunday.

Payments next year are due to increase by the greater of 2.5 per cent or the rate of inflation for September on the Consumer Price Index (CPI), which economists expect will be about 3.3 per cent.

It would boost the weekly payout from £179.60 to £185.55 for those who retired after April 2016. According to experts, the increase of £6 a week – or £312 a year – would be one of the largest on record.

In recent years, the state pension has been given a so-called ‘triple lock’, meaning it has increased by the highest of three measures: average earnings inflation, CPI inflation or 2.5 per cent. But there will only be a ‘double lock’ this year after the Government controversially dropped the average earnings inflation measure because the pandemic created chaos in the jobs market and distorted the figures.

The move broke a manifesto commitment by the Tory Party but Pensions Secretary Therese Coffey said furlough and job cuts had created a ‘statistical anomaly’ in the official data for wage rises, which had put pensioners in line for an eight per cent increase next April. Inflation jumped from two per cent to 3.2 per cent in August – the biggest increase since CPI records began in 1996 – and economists said it has inched even higher this month. George Buckley, of investment bank Nomura, predicted that September’s inflation rate would hit 3.3 per cent, while Paul Dales, at Capital Economics, said it could reach 3.4 per cent.

Helen Morrissey, pensions analyst at Hargreaves Lansdown, said most pensioners would be happy with a £300 rise. ‘Historically, this is not a bad increase,’ she said.

‘We’ve had a couple that have been higher – once it was 5.2 per cent – but that was almost ten years ago. Certainly, pensioners are not going to get something demonstrably lower than what they’ve received in the past. Pensioners will be quite happy with that.’

However, former Pensions Minister Steve Webb warned retirees could be forced to cut their spending. ‘Linking to inflation sounds as though it will protect pensioner living standards, but because inflation is set to rise, they are likely to face reduced spending power,’ he said.

‘Factors such as rising costs for energy and food bills mean that linking the pension to this September’s inflation figure will not prevent a squeeze on pensioner living standards in 2022.’