There are a number of reasons why your pension may be increasing in the next year, and this article will explore some of the reasons. The first reason is the triple lock policy which protects the income of those on state pensions.
The government has committed to raising the Basic State Pension and the New State Pension by 2.5% each year. However, the economic impact of the Covid-19 pandemic has temporarily halted this policy.
The government has decided to raise the State Pension by 3.1% – the same as inflation – until April 2022. This is a significant increase compared to the 2.5% rate of the previous year.
The previous government had imposed a 2% cap on the State Pension, but this limit has been lowered to a maximum of 3%. While the DWP has a number of plans to improve the pension, the most common changes are to make it more generous for retirees.
Firstly, the government has removed the triple lock system for state pensions. Instead, the pension will rise by 3.1% each year, following the CPI. This is a more fair approach to younger taxpayers and pensioners.
The 3.2 per cent rise is expected to be enough to keep many people warm this winter. Furthermore, inflation has already topped five per cent and is predicted to climb.
The Government has also abolished the earnings element from the increase rate next year, which means that the average increase rate will only be 2.5%.