Charity warns that the poorest face a choice between ‘heating and eating
Happening as the Government is set to reject calls from the House of Lords for a bigger pension rise, despite figures this week expected to show inflation already nearing 4pc, a decade-high.
Based on September’s inflation data, some 12.4 million recipients will gain a 3.1pc increase in the state pension to £185.15 in April, after the temporary suspension of the “triple lock” linking pension increases to wage growth which has been artificially inflated by the pandemic response adopted by the chancellor.
However, the Consumer Prices Index is expected by the Bank of England to peak at 5% early next year as gas prices soar, and then linger above its 2% target until 2024.
The Centre for Economics and Business Research (CEBR) estimated that this scenario will leave pensioners £169 worse off. Based on the Bank’s latest projections, figures show inflation at 3.4% by the end of next year. Sam Miley, CEBR economist warned that “mounting inflationary pressures will erode pensioners’ real incomes”.
“Pensioners will be particularly vulnerable to rising prices, due to the fact that their disposable incomes tend to be lower in the first place. Meanwhile, the nature of inflation at present, being heavily concentrated in utility prices, is also set to adversely affect pensioners, given that this makes up a relatively larger proportion of their overall spending.”
To raise pensions, MPs will today consider a House of Lords amendment to the triple lock suspension, which urges ministers to use the Office for National Statistics’ higher estimates of underlying wage growth, ranging from 4.1pc-5.6pc.
The amendment is, however, unlikely to pass. Caroline Abrahams, charity director at Age UK, said the organization was “extremely concerned” about rising prices.
“The state pension, the main source of income for older people, is less than £9,000 per year on average – hardly a fortune in anyone’s terms.”
“If the Government overturns the amendment, then the responsibility on Ministers to come up with a package of measures to protect the health and welfare of pensioners on low incomes this winter will be all the greater.”
“We cannot have a situation in which unforeseen cost pressures, which older people can do nothing about, result in the poorest having to choose between heating and eating when it gets colder, but that’s a very real risk as things stand.”
General Secretary of the National Pensioners Convention, Jan Shortt added that rejecting the amendment would be “shameful. She commented:
“The electorate will remember when it comes to the ballot box.”
In the meantime, financial markets are bracing for the cost of living crunch to last for years, with one inflation gauge predicted to still be above 5pc well into 2023.
As doubts grow over the Bank of England’s verdict that inflation will be “transitory”, investors expect the Retail Prices Index to remain high at 5.3pc in autumn 2023, according to money markets.
According to research from consultants Accenture and data firm IHS Market covering 12,000 businesses across the UK and Europe, almost 60% of companies intend to raise prices in the next 12 months, intensifying the pressure on households.