The biggest increase in public pensions in nearly a decade could be heading for retirees, according to analysis by the Bank of England forecasts and public research.
Pensions are expected to increase in line with expected inflation, which means that payments are expected to increase by more than four per cent by the end of the year.
The increase comes despite the fact that the ‘triple lock’ on pensions, which ensured that state pension payments would increase in line with the highest of earnings, inflation or 2.5 per cent, has been temporarily suspended.
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Labor and Pensions Minister Thérèse Coffey explained that this happened because the pandemic had “distorted wages”, reports the Mirror.
Ms Coffey decided to remove the wage element of the triple lock and instead offer a “double lock” for 2022, where state pensions would increase in line with the highest of 2.5 percent or inflation, to save the government billions.
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She told MPs in September: “Millions of people have moved from returning to work and we are witnessing an increase in the labor market with over a million vacancies.
“The combination of these has resulted in a distorting effect on wages with a statistical anomaly.
“Figures will be released in October, but preliminary ONS figures show an increase in earnings of 8.3 percent, which is over two percentage points higher than at any time over the last two decades.”
But even under the double lock, retirees are likely to see a marked increase after the Bank of England revised its inflation forecast for the rest of the year.
In a statement, the bank said: “CPI inflation is expected to rise further in the short term to just over four per cent in Q4 2021, mainly due to developments in energy and commodity prices.”
In 2012/13, the state’s pension payments increased by 5.2 percent, but since then no increase has reached four percent, according to a research briefing from the House of Commons Library, which means that retirees may be on the verge of the largest increase seen in almost a decade.
The Conservatives broke a manifesto promise when they suspended the triple lock, but Mrs Coffey has said the government is “committed to ensuring that the elderly can enjoy their retirement life with security, dignity and respect”.
She said the full national pension has risen by more than £ 2,000 a year since 2010 and the number of pensioners in absolute poverty has fallen by £ 200,000.
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