What’s in store for your pension in the new tax year?

The State Pension will rise by 3.1% in April this year, and not by earnings growth, as the ‘triple lock guarantee’ has been suspended for 2022.

Usually, this guarantee means the State Pension will rise by the highest of September’s inflation figure, earnings growth, or 2.5%. However, with earnings growth at 8.3%, this would have meant the cost of this uplift would have amounted to an eye-watering £3 billion. Find out more in our article What is the pension triple lock?

With government finances already under pressure in the wake of the pandemic, ministers claim it would have been difficult to justify such a sharp increase. However, the good news is that the government has promised to reinstate the pensions triple lock in 2023. This could see pensions receive a record-breaking increase in the State Pension, with inflation expected to soar this year to around 8%. Read more in our article Inflation reaches its highest level in almost 30 years.

From April 2022, though, the full State Pension will therefore increase in line with September 2021’s 3.1% inflation figure instead, which means it will go up by about £5.50 a week to £185.20, or a total of £9,630 a year from April 2022. The basic State Pension will rise from £137.60 to £141.80 a week, or a total of £7,374 a year. Read more in our article How the State Pension works.

This means that those relying on State Pension for their retirement income are likely to face significant financial strain. Becky O’Connor, Head of Pensions and Savings, interactive investor, said: “Inflation is at its highest for a generation; now all generations face a struggle to cope with rising prices.”

“A large proportion of low income households are pensioners. Age UK has estimated there are more than two million pensioners living in poverty in the UK.”

Author: wpadmin

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