State pension outrage as savers in the UK ‘living on a pittance’ | Personal Finance | Finance


Those who are reliant on a state pension could face a difficult 2022 as inflation continues to cause concern in the UK. The Government announced earlier this year that it would abandon its triple lock pledge, which has guaranteed that pension pots would rise by the highest of average earnings, inflation or 2.5 percent. Because average earnings soared by a big 8.3 percent, a figure distorted by the pandemic, the Prime Minister, Boris Johnson decided to take the earnings aspect out of consideration. This means the state pension will now increase by 3.1 percent, September’s inflation figure.

However, the Bank of England’s monetary policy chief has said inflation is likely to soar “comfortably” above 5 percent next spring, meaning the 3.1 percent increase could in fact be a real terms cut.

Former pensions minister Baroness Ros Altmann told that, for a long time, people reliant on their state pension have been “living on a pittance”.

She said: “Margaret Thatcher did this in 1979, she took away the earnings link from the basic state pension, and the state pension has not yet recovered to the level relative to earnings that it stood at in 1979.

“We have the lowest state pension in the developed world. Our state pensioners live on a pittance compared to many other countries, and we have made them worse off.

“And what’s even worse for me is that it comes at a time when inflation is soaring.”

Analysis using The Organisation for Economic Co-operation and Development (OECD) data shows the UK’s pension is less generous compared to other countries in Europe.

For example, UK pensioners receive 28 percent of the average working wage when they retire, whereas pensioners in Luxembourg and Austria receive 90 percent of the average working wage.

When looking at the net replacement rate, which measures how effectively a pension system provides a retirement income to replace earnings, the UK also ranked lower than all thirteen neighbouring European countries.

Baroness Altmann has warned Prime Minister Johnson that his decision to ditch the triple lock will have devastating consequences for the poorest in Britain.

READ MORE: Man refuses to pay £30k lockdown fines after ‘Downing Street party’

He said: “It costs a huge amount which is why they did it. It was unfair that they brought in this health and social care levy, which hits workers and not pensioners.

“The measure to bring down the increase on the state pension was there as a neutraliser.

“This is only for one year as well, from April 2023 they will go back to the old system.

“So should pensioners get a higher increase than 3.1 percent this year? I think the answer is no, they need to make a fair contribution given some workers aren’t seeing an increase in their wages at the same level.

“We saw as well that NHS workers are only going to get a three percent increase on their public sector pay.”

Source link


Please enter your comment!
Please enter your name here