Record state pension increase underlines affordability challenge
State pensioners see record 10.1% increase in payments under triple lock
Catherine Foot, Director of Phoenix Insights, Phoenix Group’s longevity think tank comments:
“April’s 10.1% increase in the state pension is the highest since the introduction of the triple lock, but it will be of limited consolation to the poorest pensioners as inflation remains stubbornly high. Many low-income pensioners with scarce additional resources to draw upon have struggled to keep pace with the cost of living crisis following the below-inflation rise of 3.1% last April.
“Short-term commitments to the triple lock will be easier if inflation cools, but serious questions remain around the long-term funding challenge of the state pension. Costs are set to balloon in the coming decades as our younger wave of baby boomers (those born in the early 1960s) reach state pension age and live longer in retirement*.
“The state pension has become a political hot potato with decisions delayed until after the next election. However, it’s likely we will see an acceleration of the state pension age increase to mitigate costs, so it’s critical those unable to stay in work, such as people with ill health, are supported to ensure pre-retirement poverty doesn’t spiral out of control.
“Even with a future commitment to the triple lock, relying solely on the state pension will leave people short of a decent standard of living in retirement. Given there is a significant knowledge gap among the public**, we need better communication to engage people with how much the state pension will provide and what age they can access this. Our research found one in five people (21%) don’t know if they will have enough money to live on in retirement***. Building engagement will help people to identify any gaps in savings and support decision making as they reach the end of their careers.”