The state pension will increase by 3.1% this year, the government has confirmed. This is probably good news for older people in the context of the cost of living crisis, although the inflation rate in February 2022 was 6.2%.
Many will be keen to understand how this percentage increase directly affects the amount they receive.
The state pension is currently divided into two levels: the old “basic” state pension and the new state pension.
The type of state pension a person receives will depend on their date of birth and retirement.
The basic state pension concerns men born before April 6, 1951 and women born before April 6, 1953.
READ MORE: British Gas, E.ON and EDF Energy websites crash
First, it’s important to note that the new state pension rates will come into effect on April 11, 2022 – giving Britons a few days off the current rate.
The state’s basic full board is currently £137.60 per week, but will increase to £141.85 per week.
The new sum will also drop from its current level of £179.60 per week to £185.15 per week.
However, the pension does not increase as much as many older people originally thought.
It was hoped the sum would rise by eight per cent due to the triple lockdown, however, the measure was temporarily dropped due to a perceived lack of affordability.
Earnings data was distorted due to the furlough and the pandemic thanks to the lopsided triple lock mechanism – and it was scrapped for just one year.
But with the Bank of England predicting inflation could hit 8% in the spring, and even later in the year, a substantial increase could be on the way for pensioners in 2023/24.
Steven Cameron, director of pensions at Aegon, said: “The calculation of the increase from April 2023 will use inflation through September 2022, which could be near its peak of eight per cent or more. The triple lock will pay for that, or even more if earnings growth is higher again.
“Without further tweaks from the government, this could put state pensioners on target for an exceptional increase of 8% and more in 2023, potentially the largest increase on record, offsetting the relatively April low.
“While he won’t help ease the pressures this year, he will at least offer a more generous raise in the future. And any significant increase in the state pension will increase the incomes of current state pensioners and future generations. »