Retirees and other benefit recipients will start to receive the wage increase that is not this week, as forecasters warn that the 3.1% rise will be eclipsed by a 9% spike in the inflation rate more late this year.
The state pension has increased in line with last September’s inflation rate, measured by the consumer price index (CPI).
This means that the basic public pension paid to those who reached retirement age before April 2016 has increased by £4.25 to £141.85, while those who retired after 2016 will receive £5. an additional £55 per week, bringing their benefit to £185.15 per week. .
All other benefits also increased by 3.1 percent, including working-age benefits, those related to disability, care, statutory payments and supplementary retirement benefits.
At the same time, the average wage, excluding bonuses, rose by 4% in the three months to February compared with a year earlier, according to the Office for National Statistics (ONS).
But all represent a significant decline in real terms. The Office for National Statistics today confirmed that the CPI measure of inflation hit 7% in March, with the invasion of Ukraine in particular continuing to directly and indirectly influence the price of a wide range of basic products.
If the full ‘triple lock’ of state pension increases had remained in place, which fixes benefit increases at the higher of inflation, wage growth or 2.5%, pensioners would now receive an old-age benefit worth 8.3% more than last year. .
“Traditionally, the government uses the inflation rate from the previous September to increase benefits. Unfortunately, that was before prices in the UK skyrocketed,” said Tom Selby, head of pension policy at AJ Bell.
“It comes after the Government opted to scrap the revenue element of the Triple Lock Guarantee, with the £5billion annual price tag to deliver on this manifesto promise Chancellor Rishi Sunak deemed too rich.
“To put it another way, the move cost them £9.35 a week in retirement income – or £486.20 over the course of the year.
Rising prices and the shrinking value in real terms of their savings and state benefits mean that two-thirds of those reaching retirement age this year plan to continue working – a huge jump from compared to the third of retirees in 2020 who made the same decision.
Data from abrn suggests that a quarter of the ‘class of 2022’ will go part-time, one in six will continue to work for their own business and one in ten plan to start a brand new business.
But whatever their work plans, the main driver of this “flexible retirement” is the need for income.
Only a quarter (25%) of this year’s retirees feel particularly confident they have saved enough to fund their retirement, compared to almost a third (30%) of the Class of 2021, and another quarter say they don’t know how to mitigate the impact of rising inflation on their retirement income.
Despite mounting pressure on finances, more than a third of new retirees provide financial support to their families, according to a separate study.
On average, they give £307 a month to help their families – almost £3,700 a year – with 10% giving more than £500 a month to family members or more than £6,000 a year.
With an average retirement income of £21,663, that means those thinking of retiring could end up spending around a sixth of that on helping families, which would be a big drain on their retirement income – especially more so as inflation and the high cost of utilities start to bite, suggests data from consultancy Key Later Life Finance.
Reasons for such regular financial support include just under one in ten whose families live with them rent-free, while others contribute to childcare costs, cover the cost of other essential expenses or regularly hand over money to make ends meet when needed. other living expenses.
Retirees also provide significant support to cover major costs, from new cars and cash for college fees and other bills to financing home deposits.
Research also shows that women – who tend to have lower incomes – provide more family financial support each month than men, handing out £318 compared to £300. They are also almost twice as likely as men to provide free housing to family members.