Inflation in the UK has reached a 10-year high with the Consumer Price Index (CPI) jumping 5.1% in the 12 months to November 2021.
This may mean the government could come under pressure to reconsider the pension increase for April 2022, advisory firm LCP said.
Under the revised plans, which saw the triple lock suspended for a year and replaced by a ‘double lock’ excluding the average earnings figure, retirees are set to receive a 3.1% boost to their pension.
But with inflation at 5.1% and forecast to grow even more in the next few months, LCP believes the government should reconsider the pension increase.
The firm argues that retirees will experience a “real cut in living standards of 2%”; and for those receiving a company pension they might face an even bigger cut as not all such schemes are protected against inflation.
Steve Webb, partner at LCP said: “Unless the government re-thinks the 3.1% state pension increase, 12 million pensioners could face a significant squeeze on their living standards next year.
“Not only will state pension payments fall in real terms, but income from private pensions will be squeezed, and inflation will eat away at the value of savings held by pensioners in cash Isas and bank accounts. The government has shown that it can change Universal Credit rates at short notice when it wants to, and it will now come under pressure to re-think the modest state pension increase it had planned for April 2022.”
