State pension changes explained by investment advisor
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Many older Britons are reliant upon the state pension for a source of retirement income. As such, they will be keen for the sum to rise in real terms to protect their income year on year.
The triple lock mechanism is meant to ensure this takes place, however, it has been temporarily paused this year.
The earnings component of the measure was set to soar due to warped data with many returning to work post-Covid.
Pensioners expected an eight percent rise in their sum by the time April 2022 rolled around, but their hopes were dashed.
The rise was deemed unaffordable and unfair for younger taxpayers, and as a result, this component was scrapped.
For one year only, the Government states, a double lock mechanism will be implemented.
It has considered the two remaining parts: the consumer prices index (CPI) and 2.5 percent.
CPI was measured as the higher of the two at 3.1 percent in September 2021.
This has consistently been the reference month for pension uprating since the triple lock first came in to operation.
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Consequently, state pensioners can expect their sum to increase by this amount from next month.
The key changes will take place from April 11, 2022 onwards and last for the remainder of the tax year.
The decision on the state pension increased was confirmed through the Social Security (Uprating of Benefits) Act 2021.
The Government explained its reasons for the triple lock decision, and said: “In taking this decision, the Government carefully considered the fairest approach for both pensioners and younger taxpayers, many of whom have been hardest hit by the financial impacts of the pandemic.
“In addition, last year, we delivered primary legislation to increase state pensions by 2.5 percent, when earnings fell and price inflation increased by half a percentage point.
“If we hadn’t taken this action, state pensions would have been frozen.”
The earnings element of the triple lock will return next year, it has been promised.
The state pension is split into two schemes, the older ‘basic’ state pension and the new state pension.
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Individuals will receive different amounts depending on what scheme they fall into.
Within this, even further differences will be noted as state pension payments hinge on a person’s National Insurance contributions.
The full basic state pension is currently £137.60 per week, but is set to rise to £141.85 per week.
The newer state pension is available to those who reached state pension age after April 6, 2016.
At present, the full new state pension offers Britons a sum of £179.60 per week, however, this will rise to £185.15 per week from next month onwards.
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