State pension set to rise as inflation climbs to 3%

Published by Adam Williams on 17 October 2017.
Last updated on 17 October 2017

State pension set to rise as inflation climbs to 3%

Inflation has risen once again as consumers continue to battle against rising food and transport costs, according to the Office for National Statistics (ONS).

The consumer prices index (CPI) measure of inflation rose from 2.9% in August to 3% in the year to September 2017, while the consumer prices index including owner occupiers’ housing costs (CPI-H) was 2.8% in September, up from 2.7% in August.  

This is the highest rate of both CPI and CPI-H inflation recorded since March 2012.

Inflation is also significantly higher than the Bank of England’s 2% target. This will only add to the pressure on the central bank to raise interest rates. The next base rate decision will be announced on Thursday 2 November 2017.

The retail prices index (RPI) measure of inflation, which is no longer a designated national statistic but which is still used to calculate certain financial increases such as student loan interest rates and rail fares, remained at 3.9% in the year to September 2017.

Laith Khalaf, senior analyst at Hargreaves Lansdown, says: “The pound in your pocket is depreciating, as the rising price of goods continues to chip away at its value.

“The tick upwards in inflation will increase expectations of a rate rise from the Bank of England later on this year, stoked by a flurry of hawkish rhetoric coming from Threadneedle Street.

“This wouldn’t be the first time the bank has talked the talk without walking the walk however, so it’s probably best not to count those chickens until they’re hatched.”

‘Retirees the biggest winners from today’s inflation figure’

But today’s inflation figures may be good news for those in receipt of the state pension. Maike Currie, investment director for personal investing at Fidelity International, explains: “It’s also worth noting that September’s inflation figure matters hugely to both retirees and savers. Under the government’s ‘triple lock’ guarantee, the state pension will rise in April each year by whichever number is the highest out of the September CPI inflation number, average earnings or 2.5%.

“With inflation running higher than either wages or 2.5%, this will determine the rise in the state pension next year, arguably making retirees the biggest winners from today’s inflation figure.”

Kate Smith, head of pensions at Aegon adds: “Today’s figures mean that weekly state pension payouts will rise from £159.55 to £164.37. This means that people will see their annual state pension income rise by £250. However, those on the old basic state pension will only see their state pension increase from £122.30 to £125.97 a week, giving an annual increase of only £191.”

She continues: “This month’s inflation figures are also uniquely important because they are used by the government to calculate the rise in the Lifetime Allowance (LTA) for private pensions for the first time. The increase for the LTA in 2018/19 will be £1,030,000 based on today’s figures [up from £1,000,000], and following a series of reductions it is welcome that the base-level is set to start growing again, even if on the surface the numbers aren’t large.”  

Low income families struggling with high inflation

But at the other end of the scale, analysis by Tilney shows that low income families are being hit particularly hard by high levels of inflation. Those in the bottom 10% of earners have been disproportionately affected by the rise in food costs and other essential items.

The rising cost of utility bills has also had an impact, with this group spending a higher proportion of their income on utilities than any other demographic.

Some ‘big ticket’ items - such as new cars - have fallen in price over the last two decades. However, these savings have largely benefited middle and high income households, who are more likely to buy new vehicles.

Leave a comment

Our representatives in

Our representatives in parliament conduct their duties under the guise of being public servants but in reality they operate a open shop for their own benefit which is gained from influences they possess from their positions in government and with the decisions they make every day of their existence supposedly serving our public needs , the decisions made in today’s politics are influenced by their voting power and personal financial gain interest based parties have to offer, their benefits rage from support and hidden agendas where conflicts of interests rules are flaunted regularly with no qualms The devolved immunity member members of parliament enjoy manufactures very lucrative top ups for their public earnings, Blair is a typical example whom has benefited enormously from his past public office roles and his secret financial status proves it, he failed in his job and left a financial mess for us all but he succeeded at every opportunity for himself, and even today he holds a lot of power and sways decisions which effects us all every day of our lives plus the cost of lives for his lies. Accountability in public office would expose their links with their pockets, exposing their wrongdoing is virtually impossible because they have barriers in place to protect their lucrative enterprises. The reason they oppose leaving the EU is they would have to do their jobs if we left and earn their pubic pay, then it wouldn’t be easy for our representatives to fool us all because their deceit and flaws would stand out, at the moment members of parliament have an army of state funded people doing their jobs for them here and in Brussels and clearly whom have other intentions and interests as priorities and are conducting their duties under the guise of being public servants which is never the case due to the earnings they have on offer from hidden entities and interested parties who have hidden motives. Lobbying is another betrayal of duty and it’s done for gain every day by all in Parliament, even past dignitaries have their fingers in the public purse for all their lives and we the poor public picks up the bill, 400 extra free passes to Parliament for past members to influence decisions for undisclosed gains says it all, wake up public, wake up public, the crooks are running and ruining our lives to better themselves and they care nothing of us.

Absolutely disgusting the

Absolutely disgusting the difference between the state pension you are entitled to for being born before 1950 and the new state pension you get now. How on earth is that fair no matter which way you look at it. It should be the same amount for all pensioners, not over £30 difference a week. We all pay the same price in the shops and for our bills.

i am cynical about state

i am cynical about state pension if it really will benefit me as a widow also. i get £175.each week so how much will i benefit next year please>?

I note that pensioners on the

I note that pensioners on the old system will receive £125 per week yet pensioners on the new system receive £159 per week.. Why is this ? We are all pensioners, why don't we all receive the same,