State pension will increase in 2022 – how much more will you get?

Budget 2021: Experts outline state pension changes

We use your sign-up to provide content in ways you’ve consented to and to improve our understanding of you. This may include adverts from us and 3rd parties based on our understanding. You can unsubscribe at any time. More info

The state pension increases every year to help pensioners keep up with rising costs. The next boost will come into effect in April, meaning retirees need to wait just a few more months before their weekly income is boosted.

The full new state pension will be around £185.15 per week for the 2021/22 tax year, an increase of £5.55 from the previous year’s figure of £179.60.

This means recipients of the full new state pension will receive an extra £288.60 next year, as their income rises from £9,339.20 for a full 12 months to £9,627.80.

People receiving the full basic state pension on the other hand will get a boost of £4.25 each week, taking their income from £137.60 to £141.85.

Full basic state pension recipients will therefore pick up an extra £221 next year, taking their income from £7,155.20 to £7,376.00.

The increase to the state pension was locked in after the Consumer Prices Index, detailing the rate of inflation, for the 12 months to September 2021 was confirmed at 3.1 percent. This is the rate the state pension will rise by.

Inflation is one of the measures used to uprate the state pension under the terms of the triple lock policy.

The state pension triple lock is a Government guarantee which ensures the state pension increases each year by the highest of three figures. These are 2.5 percent, the rate of inflation, or the rate of average earnings growth.

It was first introduced back in 2010 to help pensioners maintain their spending power as the cost of living rises with inflation. However, the policy is not being implemented as normal for the 2022/23 tax year.

DON’T MISS
Unpaid carers could get £3,515 via Carer’s Allowance – how to get payment ‘faster’ [INSIGHT]
When DWP claimants could receive a £1,550 payment for Universal Credit backdated plan [UPDATE]
Nationwide launches ‘competitive’ savings account paying 2% but you must act fast [SAVINGS]

Under the traditional terms of the triple lock, the state pension was set to rise by more than eight percent, following the rate of average earnings growth.

This rate of earnings growth was abnormally high, and is believed to be due to millions of Britons returning to work after coming off the furlough scheme.

Therefore, the Government decided to temporarily suspend the triple lock for next year, removing the earnings link and instead increasing the state pension by the higher of 2.5 or the rate of inflation.

The written Autumn Budget and Spending Review 2021 confirmed that the earnings link will be temporarily removed, and explained the thought behind this.

It read: “The earnings data series has been distorted by the pandemic. The Government is therefore legislating to temporarily suspend the earnings element of the ‘triple lock’ used to uprate the state pension and Pension Credit.”

As a result, pensioners will receive less than half of the increase they would have benefitted from had the triple lock been implemented as normal.

Proposals had been put forward in the House of Lords to retain the triple lock, with an amendment to take account of the unusually high earnings growth figure, which would have meant uprating the state pension by around five percent.

However, these proposals were rejected by the House of Commons, meaning the triple lock will not be honoured for the 2022/23 tax year.

Despite this, British pensioners are still set to receive the third-largest uplift in the value of the state pension in the last decade.

Since the triple lock was first introduced in the 2011/12 tax year, the state pension has only increased by more than 3.1 percent twice.

It increased by 5.2 percent for the 2012/13 tax year, based on inflation, and 3.9 percent in 2020/21, following the average earnings growth figure.

However, some people are concerned that the state pension boost may become obsolete by the time it is introduced, as many predict inflation could be higher than the 3.1 increase.

Source: Read Full Article