‘Pension gap’ could be £2,400 a year
Research on new pension rules introduced this month suggests more recently retired people may have SIGNIFICANTLY MORE INCOME PER YEAR THAN OLDER ONES. WE CRUNCH THE NUMBERS TO SEE HOW IT MIGHT AFFECT YOU...
NEW pension arrangements have started this month – and some older pensioners are set to be around £2,400 worse off than people who have retired more recently.
The state pension is set to rise by about seven per cent next year and Chancellor of the Exchequer Rishi Sunak has said it would be in line with inflation.
The Bank of England says that’s likely to be about 7.4 per cent.
But the difference between what those receiving the new state pension – which came in in 2016 – and those who retired earlier will receive could be significant.
Men born before April 6, 1951 and women born before April 6, 1953 would receive £7,922 a year, it has been reported.
The annual payment for someone receiving the new state pension would be up to £10,340 a year.
Mr Sunak told MPS last week that the triple lock mechanism for determining annual pension rises would be restored until at least 2024.
That means if inflation does hit 7.4 per cent in September, the payment for people receiving the new state pension would go up to £198.85 a week.
But for those who are receiving the old pension, the rise would only see their income go up to £152.35 a week. That’s £2,418 a year less than newer pensioners.
This month, the full new state pension has increased to £185.15 a week because the rise for this year is just 3.1 per cent. This is because the triple lock mechanism had been downgraded in the past.
That means someone receiving the old basic state pension will receive
a maximum of £141.85 a week, compared to £185.15 a week for newer pensioners.
Mr Sunak also defended his recent Spring Statement following widespread criticism it failed to address the cost of living crisis.
He said ‘irresponsible’ borrowing levels risked stoking inflation even further, adding to the pressure on living standards
He said: “We are already forecast to borrow in this coming year about 60 per cent, more as a percentage of GDP than our post-war average, 20 per cent more as a percentage of GDP than we were forecast to borrow in October.
“So it is already a significant amount of borrowing. My view is an excessive amount of borrowing now is not the responsible thing to do.
“If someone’s view is Government can or should make everybody whole for inflation – particularly inflation at these levels caused by global supply factors – then that’s something that I don’t think is do-able.”