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State pensioners are set for another large payment increase next year but this may not keep up with soaring prices, an expert has said.
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said pensioners could get a seven percent increase next year in line with the average earnings element of the triple lock pledge.
This would mean the full new state pension would increase from £203.85 a week to £218.12 per week next April, an increase of around £740 a year.
Ms Morrissey said: “This is a big increase but is still massively outstripped by essentials such as food price inflation so unless we see that fall in the coming months pensioners will find the extra money does not stretch very far.”
Inflation for food and non-alcoholic drinks was at 17.4 percent for the year to June, down from 18.4 percent in May.
Recent predictions for overall inflation suggest it could be at 6.9 percent in September, which is the figure that is used for determining the triple lock and how much the state pension will go up next April.
Ms Morrissey also said with the efforts to bring down inflation, state pension increases for the coming years may not be as large as they have been previously.
She explained: “The Government has pledged to bring down inflation and aims to get it down to around five percent by the end of the year.
“If this continues then we shouldn’t see the huge increases in state pension that we have seen recently but again this is also dependent on factors such as wage growth.”
The Bank of England has been working to bring down inflation by consistently increasing the base interest rate since December 2021, with the base rate now at 5.25 percent.
This may provide a boost for pension planners, as many banks and building societies have passed on the increases, upping the rates on many savings accounts.
Ms Morrissey encouraged people planning for their retirement to consider other sources of income to supplement their state pension.
She said: “The state pension forms a foundation to your retirement income but it would be difficult to survive on it alone and you need other savings in the form of pensions, savings and ISAs to boost your income.
“The auto-enrolment policy means all qualifying employees are now enrolled into a workplace pension where they will get contributions from their employer on top of their own and the government also tops up these contributions in the form of tax relief.
“Over time this means more people will enter retirement with an income from their workplace pension but it is important to realise that current minimum contribution rates are not enough to give a great income – you will need to look at how you increase them over time – for instance when you get a pay increase or move jobs.”
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