State pension increase fails to keep up with inflation | Personal Finance | Finance


State pension age Britons are often one of the most financially vulnerable groups in the country as they attempt to get by with a lower level of income. With this year’s state pension increase already locked in and inflation booming, there could be trying times ahead for the UK’s retirees.

CPI inflation reached a decade-high figure of 5.1 percent for the 12 months to December 2021.

New research carried out by Opinium on behalf of Aegon UK in December shows widespread concern among consumers of the impact such high inflation will have on daily life and their savings.

Almost two thirds (64 percent) of those surveyed said that they are concerned about the impact that an increase in inflation will have on their personal finances.

This figure rose to 70 percent among Generation X, which is those aged 43-56.

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Such a disparity raises questions over whether or not the state pension increase later this year is sufficient.

When considering the fact retirees had originally been on course for a monster boost to their state pension of more than eight percent, before the temporary suspension of the triple lock, an increase of less than half that amount it could have been may be hard to stomach for many.

Steven Cameron, Pensions Director at Aegon, warned of the problems that could come with inflation rising to its highest rate since 2011.

He said: “With inflation rising to its highest rate since 2011, many individuals are facing a cost-of-living crisis as prices surge.

“Undoubtedly, those on a fixed income face a tricky time ahead, and these include pensioners who will be significantly impacted with a sizeable gap between the current 5.1 percent inflation level and the much lower 3.1 percent used to calculate this year’s state pension increase.

“At what is already a penny-pinching time for households the length of the country, our research shows that a high proportion are concerned about the immediate impact of inflation levels not seen for a decade on the affordability of everyday living.”

Mr Cameron pointed to hikes in gas and electricity costs to the price of essential items such as clothes and food as some of the effects inflation has had.

A large number of people also expressed apprehension around the impact of inflation on their ability to plan ahead financially.

The third most cited concern (37 percent) was the ability to save as much money followed closely by worry about the purchasing power of cash savings decreasing (36 percent).

Mr Cameron said: “A high proportion of those we surveyed said that they were concerned about not being able to save as much as a result of rising inflation as well as the purchasing power of cash savings decreasing.

“Those holding large amounts in cash savings are particularly at risk from high inflation.

“Despite the Bank of England raising interest rates in December to 0.25 percent, any of this increase passed on to savers is likely to be outweighed by inflation decreasing purchasing power.”

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