State pension to rise by 3.1% in April as inflation dips slightly

The consumer price index figure, published on Wednesday by the Office for National Statistics, means that from April the basic pension is set to rise by £4.25, from £137.60 a week to £141.85 a week, with the full new state pension growing by £5.55, from £179.60 a week to £185.15 a week.

Inflation was slightly below its 3.2 per cent jump seen in the 12 months to August 2021, up from 2 per cent in July, which was the largest ever recorded increase at the time.

The slight dip was due to slower rising prices in restaurants, largely due to last years Eat Out to Help Out scheme, but this was offset by most other categories, including price rises for furniture and household goods and food prices falling more slowly than this time last year, according to the ONS.

While this growth will be welcomed by pensioners, there is a lingering bitter taste as pensions would have increased by 8.3 per cent had the earnings element of the triple-lock been retained.

This would have increased the basic state pension to £149 a week and the full new state pension to £194.50 a week.

The Treasury will save around £4.5bn as a result, according to AJ Bell.

Tom Selby, head of retirement policy at AJ Bell, said: “Each 1 percentage point increase in the state pension costs the exchequer an estimated £900m, meaning the Treasury is likely to save around £4.5bn as a result of the move.

“For savers, the decision to ditch the triple-lock was another reminder that the state pension, while valuable as a retirement income foundation, remains uncertain and subject to the whims of politicians.”

Under triple lock rules the state pension is increased by the highest of earnings growth, price inflation or 2.5 per cent a year.

But in September, the government suspended the wages element to avoid disproportionate rises following the pandemic.

This article originally appeared on FTAdviser.com