Will my pension keep pace with inflation?

Notepad_Phil

Reg_Smeeton said:

Annoying paywalled article, but maybe I’m not the only eccentric 

https://www.telegraph.co.uk/pensions-retirement/news/even-governments-people-admit-triple-lock-didnt-need-broken/

The drop of the earnings link was due to the artifical drop and then rise in earnings due to Covid. Whether or not the 'pot' has technically enough money to pay that increase is secondary to whether it was right to ignore earnings because of that. And despite what Paul Lewis says, the Government people did not admit that the triple lock did not have to be broken, a department has just reported the fact that technically there would be enough money in the 'pot'.

There is a debate to be had as to whether it is possible use a closer date than last September to affect the increase in pension in April, but that is a different debate to whether statistical quirks should affect pension rises.

sevenhills

A conclusion was reached in November 2020, where following a consultation, HM Treasury announced that it would reform RPI in line with CPIH approach by February 2030.

The Pensions Policy Institute estimates that the impact on pension holders will be felt the greatest for those with final-salary pensions. It also estimated the average reduction in lifetime income from an individual’s RPI-linked pension post-retirement could be 5% for a woman and 4% for a man (based on a 65-year-old in 2020).

Members of different pensions funds from Marks and Spencer, Ford and BT have challenged the alignment to CPIH. They claim that government did not properly consider the effect aligning to CPIH would have on those whose pensions were linked to RPI. This judicial review is still ongoing.

https://actuaries.blog.gov.uk/2021/08/23/measures-of-price-inflation-rpi-cpi-and-cpih/

Workerdrone

Reg_Smeeton said:

atush said:

Reg_Smeeton said:

sevenhills said:

In previous years the state pension had the triple lock, but this year it is increasing by 3.1% when RPI inflation is presently 7.8%

I’m astounded more was not made of the governments broken promise on the triple lock. I know it was the wages part that was suspended rather than inflation on this occasion, but the precedent has been set now that if the numbers aren’t what the government want to see they will just override it.

Im astounded you think taxpayers can afford it, with the huge costs of the pandemic

Whilst we can afford to spaff endless billions up the wall on nuclear weapons we will never use, I really don’t think a few extra quid a week on the state pension to keep good on the promises you were elected on is pie in the sky. It’s going to be a long hard year for the most vulnerable who rely upon it.

As a solution to the problems we could just let off those said nuclear weapons. Then we would all be very warm (Albeit it briefly) and never have to worry about the cost of food or petrol ever again :-)

Malthusian

Notepad_Phil said:

Reg_Smeeton said:

Annoying paywalled article, but maybe I’m not the only eccentric 

https://www.telegraph.co.uk/pensions-retirement/news/even-governments-people-admit-triple-lock-didnt-need-broken/

The drop of the earnings link was due to the artifical drop and then rise in earnings due to Covid. Whether or not the 'pot' has technically enough money to pay that increase is secondary to whether it was right to ignore earnings because of that. And despite what Paul Lewis says, the Government people did not admit that the triple lock did not have to be broken, a department has just reported the fact that technically there would be enough money in the 'pot'.

Can't read the article, but there is no "pot". The UK Government is over £2.2 trillion in debt.

It is perfectly possible that the younger generations could have afforded to stump up for an artificial 8% increase in pensions out of their current and future earnings, but the electoral consensus was that after 2 years of lockdown we should refrain from adding insult to injury.

Notepad_Phil

Malthusian said:

Notepad_Phil said:

Reg_Smeeton said:

Annoying paywalled article, but maybe I’m not the only eccentric 

https://www.telegraph.co.uk/pensions-retirement/news/even-governments-people-admit-triple-lock-didnt-need-broken/

The drop of the earnings link was due to the artifical drop and then rise in earnings due to Covid. Whether or not the 'pot' has technically enough money to pay that increase is secondary to whether it was right to ignore earnings because of that. And despite what Paul Lewis says, the Government people did not admit that the triple lock did not have to be broken, a department has just reported the fact that technically there would be enough money in the 'pot'.

Can't read the article, but there is no "pot". The UK Government is over £2.2 trillion in debt.

It is perfectly possible that the younger generations could have afforded to stump up for an artificial 8% increase in pensions out of their current and future earnings, but the electoral consensus was that after 2 years of lockdown we should refrain from adding insult to injury.

The 'pot' mentioned in the article is the "accumulated surplus in the National Insurance Fund" which is currently showing there is enough money for the next five years - though in my view just because there is enough money is not a reason in itself why an artificial jump in payments should be made.

Malthusian

Borrowing some money, putting it in a bank account and calling it an "Insurance Fund" doesn't stop it being borrowed money.

I think both of us are agreed that just because we could have sustained even more borrowing to pay for an 8% increase doesn't mean we should.

hugheskevi

Setting aside arguments that the Fund is irrelevant as it is just the Exchequer putting money into different pots whilst being heavily in debt overall and that it should be the overall net position which determines what is affordable, the National Insurance Fund is forecast to require a Treasury Grant of £11.6bn by 2030/31, rising to £55.9b 10 years later. Hence increasing spending now would deplete the fund faster and lead Treasury Grants being required at an earlier date.

If you know you are rapidly running out of money, it would seem odd to choose to spend what you have immediately just because you have enough for the immediate future, rather than work on how you can preserve what you have and focus on how to increase resources in advance of the deficit occurring.

Notepad_Phil

Malthusian said:

I think both of us are agreed that just because we could have sustained even more borrowing to pay for an 8% increase doesn't mean we should.

Agreed.

hugheskevi said:

If you know you are rapidly running out of money, it would seem odd to choose to spend what you have immediately just because you have enough for the immediate future, rather than work on how you can preserve what you have and focus on how to increase resources in advance of the deficit occurring.

Unfortunately such thoughts don't seem to occur to many of our 'personal finance journalists' and certainly not to Paul Lewis with his clickbait articles.

sevenhills

Malthusian said:

I think both of us are agreed that just because we could have sustained even more borrowing to pay for an 8% increase doesn't mean we should.

It would depend on what has been done previously and what has been agreed. I have agreed certain terms with my mortgage company, I cannot change those terms just because I am in debt due to a pandemic.

arnoldy

Silvertabby said:

Don't forget to factor in that public sector increases are uncapped, whereas most private DB schemes are capped at 5%.

This hasn't been so much of an issue over the last 20 years or so of low inflation, but....

Actually its worse than that. Most (not all) private sector DBs will have parts of the same pension capped at 0%, 2.5% and 5%. Even that is dependent on the funding level of the scheme - it needs to be 105% + - otherwise you get nothing.

Highlights the pensions apartheid between Public DBs, Private DBs, and DCs.