THE government could change the way the annual State Pension rise is calculated because of Coronavirus.
Pensioners are expected to get a bumper pay rise next year because the economy has bounced back as lockdown has lifted.
The Chancellor Rishi Sunak is considering a ‘double lock’ on pension rises
The State Pension rises each year in April at a rate that’s the highest of three things: average earnings, inflation or 2.5%.
This is know as the “triple lock” and is in place to ensure that pensioner’s income rises enough each year.
But the pandemic has skewed wage growth, and average earnings could be as high as 8%, which would increase the retirement benefit by more than £700 a year.
The government is now considering a “double lock”, according to The Telegraph, which would see a one off calculation which does not include this high rate of wage growth.
The Chancellor Rishi Sunak is considering a State Pension rise based on either inflation or 2.5% as one of the options, according to the newspaper report.
Inflation is also currently at 2.5% but the rise is based on the consumer price index for September this year and could be higher.
Rebecca O’Connor, head of pensions and savings at Interactive Investor, previously told Trending In The News that the State Pension rate is likely to be higher than 2.5%.
Trending In The News has previously reported that Boris Johnson is considering dropping the triple lock, which could add £3bn to the government’s welfare bill.
Trending In The News revealed last week that Tory MPs were being sounded out about their thoughts on whether there could be changes to the triple lock.
Another option being considered is measuring wage growth over two years rather than just a single year.
The state pensions is currently worth up to £179.60 per week, for those under the new system and who have paid National Insurance for 35 years.
A rise of 8% on the current rate would add around £14 a week to this amount.
If the increase was 2.5% it would add around £4.50.
The state pension increased by 2.5% for April 2021 using the triple lock formula and rose by 3.9% in 2020 based on wage growth.
This woman is one of four million people who could miss out on a state pension – here’s how you can avoid it too.
Millions of people’s pots could be worth thousands of pounds less than expected when they come to retire.
Did you miss our previous article...
