The UK state pension is set to increase by 3.1 per cent in 2022/23, in line with September’s inflation figure.
The figure, released this morning (October 20) as measured by the consumer prices index, means from April the basic pension is set to rise by £4.25, from £137.60 per week to £141.85 per week, with the full new state pension growing by £5.55, from £179.60 per week to £185.15 per week.
Inflation was slightly below its 3.2 per cent jump seen in the 12 months to August 2021, up from 2 per cent in July, which was the largest ever recorded increase at the time.
The slight dip was due to slower rising prices in restaurants, largely due to last year's Eat Out to Help Out scheme, but this was offset by most other categories, according to the ONS, including price rises for furniture and household goods and food prices falling more slowly than this time last year.
While this growth will be welcomed by pensioners, there is a lingering bitter taste as pensions would have increased by 8.3 per cent had the earnings element of the triple-lock been retained.
This would have increased the basic state pension to £149 per week and the full new state pension to £194.50 per week.
The Treasury will save around £4.5bn as a result, according to AJ Bell.
Tom Selby, head of retirement policy at AJ Bell, said: “Each 1 percentage point increase in the state pension costs the Exchequer an estimated £900m, meaning the Treasury is likely to save around £4.5bn as a result of the move.
“For savers, the decision to ditch the triple-lock was another reminder that the state pension, while valuable as a retirement income foundation, remains uncertain and subject to the whims of politicians.
“Indeed, both the amount you receive and the age you receive it has been subject to significant reform over the last decade.
“It is therefore crucial that anyone wanting control over their retirement and a standard of living above the basic minimum covered by the state pension saves as much as they can as early as they can, taking advantage of matched contributions and tax relief and allowing compound growth to work its magic over the long-term.”
Under triple lock rules the state pension is increased by the highest of earnings growth, price inflation or 2.5 per cent a year.
But last month (September 7) the government suspended the wages element to avoid disproportionate rises following the pandemic.
Steven Cameron, pensions director at Aegon, pointed out the 3.1 per cent rise was the third highest increase since the triple lock was introduced over a decade ago.
Cameron said: “While some pensioners will be disappointed that the government broke its manifesto commitment to keep the triple lock, others will acknowledge the intergenerational challenges of granting an artificially high increase based on a statistical anomaly in the earnings figure due to the pandemic.
“An 8.3 per cent earnings based increase would have represented a windfall bonus for state pensioners, but would have created a £7.5bn annual bill paid for from the National Insurance of today’s workers.