We’re halfway through the winter and spring is on the way. But that will do nothing to lift the mood of many pensioners who are facing a cost of living squeeze. And now, it seems the State Pension increase in April is unlikely to keep pace with inflation.
Here, I take a look at the State Pension increase, why it’s actually a cut in real terms and what you can do if you’re facing a cost of living squeeze.
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State Pension increase
In April 2022 the basic State Pension will increase to £141.85 per week, rising from £137.60. If you’re on a full State Pension, then your payments will increase to £185.15 per week, rising from £179.60. That’s a total increase of 3.1%.
Spiralling inflation
The State Pension increase wouldn’t be too bad in a normal year. But it is nowhere near enough to beat spiralling inflation this year. Soaring food and energy costs drove inflation to 5.4% in the 12 months to December 2021. And experts expect there to be further price rises, with energy costs predicted to rise significantly in spring.
Some analysts think that inflation could rise to over 7% in April as the current price cap on variable energy comes to an end and costs jump dramatically.
Why the government suspended the triple lock
The government decided on the State Pension increase back in September 2021, when inflation was at the lower level of 3.1%. That was before the energy crisis really got going. Over the next few months, it became clearer that inflation was soaring out of control.
Back in September, the triple lock would have meant increasing the State Pension by 8%. That’s because the triple lock is based on the higher of inflation (calculated using the CPI), average wage price growth or 2.5%. And wages grew by 8% in 2021 as staff shortages led to wage increases.
As the 8% rise was considered an anomaly, the government made the decision to suspend the triple lock and increase the State Pension at the lower level of 3.1%.
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What the State Pension increase means for pensioners
For pensioners, the State Pension increase simply isn’t enough to beat inflation. The decision was made before inflation spiralled in the last few months of 2021.
It means that the State Pension is shrinking in real terms and pensioners’ buying power will reduce. Many pensioners will have less money in their pockets, and some may even face poverty.
What to do if you’re facing a cost of living squeeze
If you’re nearing retirement or you rely on the State Pension, then is there anything you can do to help with the cost of living squeeze?
Here are some tips:
- If money is tight, then check whether you’re eligible for pension credit. Many people don’t realise they might be entitled to more money.
- Work out a budget. There are many budgeting apps or websites online to help. Many people find they can squeeze out some extra savings.
- Shop around to make sure you’re getting the best deals. Swapping your phone company or home insurance could save you some serious cash.
- Create meal plans. You can save money by budgeting for a couple of super-cheap meals each week.
- If you’re struggling with debts, then you can get advice from Citizens Advice or Stepchange.
- If you’ve got credit card debt, then see if you can transfer it to a 0% card to save on interest costs.
