In­fla­tion-bust­ing pay rise good news for pen­sion­ers

The Daily Telegraph - Your Money - - MONEY - Laura Miller

Re­tirees will en­joy a £220 boost next year, more than the in­crease in the cost of liv­ing, thanks to the “triple lock” pro­tec­tion on their state pen­sion.

The state pen­sion is ex­pected to rise by 2.6pc from April next year, be­low the 3pc in­crease en­joyed in 2017-18. But with in­fla­tion com­ing in at 2.4pc in Septem­ber, the in­crease is still more than the ris­ing cost of liv­ing. This is be­cause of the triple lock pro­tec­tion that means the state pen­sion will rise ev­ery year by the higher of earn­ings, prices or 2.5pc.

Wages have be­gun to rise after stag­nat­ing for a decade, with av­er­age earn­ings growth at 2.6pc in July. It is that fig­ure which is ex­pected to be used to boost the full flat-rate state pen­sion by £221 to £8,767.20 a year, a weekly in­crease from £164.35 to £168.60.

Those on the much lower old ba­sic state pen­sion will see a rise from £125.95 per week to at least £129.10, an an­nual rise of £163 per year.

Tom McPhail, of fund shop Har­g­reaves Lans­down, said: “One of the most bru­tal lessons of the last elec­tion cam­paign for the Tories was not to take their core con­stituency for granted: don’t up­set pen­sion­ers.

“It was no sur­prise then last week to see the Gov­ern­ment re­it­er­ate its com­mit­ment to the triple lock for the re­main­der of this par­lia­ment.

“At some point in the fu­ture, a gov­ern­ment, pre­sum­ably not this one, is likely to have to grasp the net­tle and move away from the triple lock. If this doesn’t hap­pen then the state pen­sion will in­ex­orably in­crease rel­a­tive to earn­ings and in­fla­tion.

“In the mean­time, the state pen­sion is a vi­tal be­drock in­come to cover much of pen­sion­ers’ es­sen­tial ex­pen­di­ture in re­tire­ment.”

Septem­ber’s 2.4pc in­fla­tion fig­ure also in­flu­ences the life­time al­lowance, the limit which re­stricts how much peo­ple can put into their re­tire­ment sav­ings with­out pay­ing a tax charge.

It will mean an in­crease to the life­time al­lowance in 2019-20 from £1,030,000 to £1,054,800. Any pen­sion sav­ings above this are taxed puni­tively on with­drawal, by 55pc or 25pc.

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