Steven Cameron, Pensions Director at Aegon comments:
“Today’s inflation figure which has increased to 10.4% for the year to February is an unwelcome move in the wrong direction from the 10.1% rate in January. It comes just days before state pensioners will receive a 10.1% increase as a result of the ‘triple lock’, meaning despite a record double digit increase, their pensions will just fall short of keeping up with prices. The triple lock pays the highest of price inflation, earnings growth or 2.5%. The inflation figure used is for the year till September.
“The Chancellor’s Budget last week predicted that inflation might fall to 2.9% by the end of the year, which would be great news for everyone struggling with the cost of living crisis. But the increase means we’ll need an even more dramatic fall from today’s position to achieve this.
“For state pensioners, the triple lock if maintained would use the inflation rate to this September, which depending on the months ahead, could be far lower. However, it could be that earnings growth begins to outstrip inflation with the triple lock then based on this. The earnings figures used are the year on year increase for the period May to July and the most recently announced figure here is 5.7%.
“Of course, there’s no guarantee that the triple lock will continue to be honoured and this may depend on the movement in both price and earnings inflation in the months ahead.”
Andrew Tully, technical director, Canada Life said: “The Bank of England is poised to raise the Base Rate by a further 25bp on Thursday in a further attempt to cool inflation. Markets expect this to signal a pause in its hiking cycle, although future rises are possible dependent on the available data, with our economists not expecting any loosening until next year.
“With limited tools available, inflation remains stubbornly high, with forecasts suggesting a record fall in living standards over the next two years. This will make for unpalatable reading and offer little comfort for households on fixed incomes, despite the 10.1% triple lock rise in state pension due to kick in from 6 April.”
The latest UK inflation data shows CPI grew by 10.4% in the year to February 2023. That means each household across the UK will need to spend an extra £2,603 a year to maintain their living standards, or collectively £70bn.
Becky O’Connor, Director of Public Affairs at PensionBee, commented: “People may have been hoping for some light at the end of the tunnel of ever-increasing inflation, so this month’s data will be disappointing.
“High inflation is hard to cope with day-to-day, but if you are also trying to build long term wealth, it makes it even more difficult to meet your future goals for retirement.
“Pension saving becomes an uphill battle in times of higher inflation. Against this backdrop, people need iron will and discipline to take positive steps with their pension, like increasing contributions. Not only is it harder to find the spare cash to make contributions, it also makes it harder to generate a ‘real’ return above inflation, so your money still has purchasing power when you need it later on.
“For pensioners, the rise in the State Pension in a few weeks, from £185.15 to £203.85 a week for the New State Pension and from £141.85 to £156.20 for those on the Basic State Pension, cannot come soon enough.
“For anyone already drawing an income, coping with inflation on a finite pot of money is a difficult and stressful slog. A full State Pension and average private pension pot should be enough to cover the basics in life, like food and heat. But with inflation continuing to go the wrong way, covering the basics remains a challenge for all, but particularly those on low, limited incomes.”
PensionBee has an inflation calculator to help people work out the impact of inflation on their pension savings.
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