Ask the Expert: How much will my pension go up next year?
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Will the cost of living continue to outstrip the rise in my pension, asks our reader. Carl Lamb of Almary Green responds.
Q. I am a pensioner, with a small income from an annuity as well as my state pension. I am getting really worried about how I can continue to meet my bills as life seems to be getting more expensive. I'm hoping that the state pension will go up next year but am not sure how much more I'll get. Can you advise please?
Response from Carl Lamb of Almary Green
A. Any increase in the full state pension will come into force in April next year. The amount of the increase will be based on the 'triple lock'. What this means is that the higher of three measurements will be used to calculate the increase: the increase in average earnings, inflation (using the Consumer Price Index as its source) or 2.5%.
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The inflation figure used is that as of September of the previous year – so last month's inflation will set the rate to be used to calculate the increase to come in next April.
The good news (of a sort) for pensioners is that inflation has spiked in September, reaching 3% which is the highest rate recorded since March 2012.
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This is indeed higher than average earnings so will be the rate used. However, it's not entirely good news as it does, of course, mean that prices have gone up by that amount. What this means in terms of the state pension is that the basic pension will go up by nearly £5 per week.
There is much speculation that the Bank of England will increase their interest rate in the next couple of months to help keep inflation in check, so hopefully September's figure won't be repeated in subsequent months: it would end up as something of a bonus for pensioners if the rate used to calculate the increase in the state pension is the highest monthly figure recorded all year.