Pensioners face ‘rollercoaster’ as squeeze in 2022 followed by ‘biggest ever’ pension rise in 2023 and £200 per week pension in 2024 – Steve Webb, LCP

Britain’s pensioners face a financial ‘rollercoaster’ in the next few years according to calculations by LCP partner Steve Webb, based on the latest forecasts from the Office for Budget Responsibility. This April state pensions will rise by just 3.1% – less than half the rate of inflation – and the Spring Statement measures offered little help for most pensioners. But by April 2023 the pension rise is forecast to be 7.5% - the biggest ever cash rise in the state pension. And by April 2024 the rate of the new state pension will go through the £200 per week barrier.

The coming twelve months are set to be one of the toughest on record for many pensioners. The main help they will receive from the Chancellor is the already-announced £150 off Council Tax bills, but only for those in properties in Bands A-D. They will also get £200 off energy bills in the Autumn, but this will have to be repaid over the coming five years. However, the Spring Statement offered little new hope for pensioners:

• The National Insurance changes – the biggest giveaway – offer nothing to retired pensioners
• The 5p fuel duty cut will mainly benefit those who are in work and who drive regularly

The one additional source of help which may be relevant to pensioners who are struggling the most is the extra £500m for local authority ‘hardship funds’. Pensioners in the direst need will be able to approach their local authority for support, almost certainly on a means-tested basis, with each Council making up its own scheme.

By contrast, in April 2023, the state pension rate will reflect the surge in inflation, with the OBR forecasting a 7.5% increase. This will add over £10 per week to the basic state pension and over £13 to the new state pension – the biggest cash increases ever. And a further increase in 2024, forecast by the OBR to be 3.4%, will take the new state pension through the £200 per week mark, as shown in the table:

Source: LCP calculations based on OBR ‘triple lock’ projections – Table 2.8, Economic and Fiscal Outlook

Commenting, LCP Partner Steve Webb said: “Pensioners are set to face a financial rollercoaster in the coming years with a tough squeeze this year followed by a catch-up next year. The Spring Statement will have been a big disappointment, and some pensioners may find themselves having to apply to their Council for hardship funds simply to make ends meet. But next year should see the biggest ever cash rise in the value of the state pension, as pension rates catch up. The problem is that ‘jam tomorrow’ will not pay bills today”.