Pensioners face ‘rollercoaster’ couple of years
People living on the state pension face a squeeze this year followed by a big rise to pensions in 2023 and 2024.
The state pension will rise by just 3.1% this April, less than half the rate of inflation. There will be no extra help for pensioners during the cost of living crisis, with yesterday’s Spring Statement providing no targeted help for low income households.
However, by April 2023 the pension rise is forecast to be 7.5% – the biggest ever cash rise in the state pension. And by April 2024 the rate of the new state pension will go through the £200 a week barrier.
Steve Webb, partner at Lane Clark and Peacock, said Britain’s pensioners face a financial ‘rollercoaster’ in the next few years. He has crunched the numbers regarding how pensions will be calculated, based on the latest forecasts from the Office for Budget Responsibility (OBR).
Webb says the coming 12 months are set to be one of the toughest years on record for many pensioners. The main help they will receive from the chancellor is the already-announced £150 off Council Tax bills, but only for those in properties in Bands A to D.
They will also get £200 off energy bills in the Autumn, but this will have to be repaid over the coming five years.
Webb said the Spring Statement offered little new hope for pensioners. The National Insurance changes, Rishi Sunak’s biggest giveaway, offer nothing to retired pensioners. Meanwhile the 5p fuel duty cut will mainly benefit those who are in work and who drive regularly
The one additional source of help which may be relevant to pensioners who are struggling the most is the extra £500m for local authority Household Support Funds. Pensioners in the direst need will be able to approach their local authority for support, almost certainly on a means-tested basis, with each council making up its own scheme.
By contrast, in April 2023, the state pension rate will reflect the surge in inflation, with the OBR forecasting a 7.5% increase. This will add more than £10 per week to the basic state pension and more than £13 to the new state pension – the biggest cash increases ever.
A further increase in 2024, forecast by the OBR to be 3.4%, will take the new state pension through the £200 per week mark, with Webb calculating that the new state pension will be £205.85 a week in 2024/25.
Webb said: “Pensioners are set to face a financial rollercoaster in the coming years with a tough squeeze this year followed by a catch-up next year. The Spring Statement will have been a big disappointment, and some pensioners may find themselves having to apply to their council for hardship funds simply to make ends meet. But next year should see the biggest ever cash rise in the value of the state pension, as pension rates catch up. The problem is that ‘jam tomorrow’ will not pay bills today.”