‘Inflation fall’ would put end to big payouts

THE prospect of inflation falling next year means pensioners are unlikely to receive another bumper rise.

Inflation hit 10.1 per cent in September and so the state pension is set to increase by the same figure next April – if the Government keeps its manifesto vow to protect the triple lock.

This lifts state pensions by the highest of the previous September’s inflation, wage growth or 2.5 per cent.

The amount that pensioners receive will be a record rise to £203.85 per week – £10,600 annually.The basic state pension, paid to those who hit pension age before 2016, would grow to £156.20 per week – £8,122 per year.

Forecasts of continuing double-digit inflation had triggered expectations of another big increase next year.

But the Bank of England said this week that it now expects inflation to cool to 7.9 per cent in autumn 2023 and fall to around five per cent by the end of the year. That would set the state pension at £219.95 a week, £11,437 a year, with the basic rate pension rising to £168.55 a week – £8,765 a year.

Jon Greer, of wealth manager Quilter, said the downgraded inflation forecast would be good news for the Treasury: “Keeping the triple lock in place may prove less expensive than first thought.

“The Government will be weighing up at the moment whether they honour their manifesto promise of keeping the lock in place or opt to increase the state pension by a different measure in the face of a very difficult and uncertain economic outlook.”

Last year, pensioners expected an 8.3 per cent rise based on wage growth which would have given them an extra £13,000 over a typical retirement.

But PM Rishi Sunak, then Chancellor, said the figure was skewed by the pandemic – and raised the pension by just 3.1 per cent.