Experts back state pension for bumper rise
Double boost for pensioners: Jeremy Hunt promises action over poor savings returns as experts back state pension for bumper rise
- Experts predicted that ‘sticky’ inflation could see state pension rise next year
Pensioners were in line for a double boost to their finances last night.
Amid growing pressure caused by the soaring cost of living, Jeremy Hunt pledged to take on the banks over the stingy interest rates offered to many savers.
Experts predicted that ‘sticky’ inflation could result in another bumper rise to the state pension next year – potentially worth around £750.
High street banks have been accused of profiteering by hiking interest rates for borrowers, while leaving rates for savers low. The Chancellor yesterday accused them of dragging their feet on the issue, and pledged to take action to get a better deal for savers.
He revealed he used a summit with the banks last week to tell them ‘in no uncertain terms’ that it was taking ‘far too long’ to pass on rises in the Bank of England base rate.
Amid growing pressure caused by the soaring cost of living, Jeremy Hunt pledged to take on the banks over the stingy interest rates offered to many savers.
Having failed to get a satisfactory answer he said he was now ‘working on a solution’ to force them to act.
Treasury sources said the Chancellor was talking over options with the Financial Conduct Authority.
In some cases, rates on these accounts remain below 1 per cent, despite the Bank of England hiking base rates to 5 per cent – the highest level since 2008.
Ministers believe it could also contribute to the fight against inflation by making it more attractive to save instead of spend. It came as:
- Experts predicted the state pension could rise by 7 per cent next year, worth an extra £750 to recipients, or more than £14 a week;
- Rishi Sunak warned he was ready to take decisions that ‘people may not like’ on public sector pay in order to drive down inflation;
- Downing Street urged supermarkets to ‘pass on the savings they are making with the fall in global energy costs’; No 10 vowed to press ahead with reinstating green levies that will add £170 to energy bills;
- Mr Hunt prepared for a crunch meeting with regulators where he will urge them to prevent profiteering by utility firms and supermarkets.
Experts yesterday predicted another bumper increase in the state pension next year as stubbornly-high inflation figures feed into the ‘triple lock’ guarantee. Inflation in September, which is used to calculate the following year’s uprating, is forecast at 7 per cent according to the Bank of England’s latest projections.
Under the triple lock, the state pension must increase by inflation, wages or 2.5 per cent – whichever is higher. It was suspended in 2022 because of distortions in wage growth caused by the pandemic.
It was restored this year and supporters warned it would be ‘totally unacceptable’ for the guarantee not to be honoured.
Alice Guy of Interactive Investor said a 7 per cent rise could take the annual state pension from £10,600 to £11,342.
‘The state pension forms the backbone of most people’s pension income and a rise in the state pension will be a lifeline to many people on the breadline,’ she added.
Ministers agreed to raise the state pension by 10.1 per cent this year following a fierce internal debate. And one former Tory Cabinet minister said it would be ‘political suicide’ to try to squeeze pensioners in the run-up to next year’s election.
Former pensions minister Steve Webb, a partner at consultants LCP, said: ‘This isn’t a giveaway. This is compensation for a soaring cost of living.’
Mr Hunt told MPs: ‘It is taking too long for the increases in interest rates to be passed on to savers, particularly with instant access accounts. I raised that issue in no uncertain terms with the banks when I met them and I’m working on a solution because I think it is an issue that needs resolving.’
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