Rishi Sunak grilled by Neil on state pension increases
The Chancellor of the Exchequer has promised to stick to the Government's annual pension rise – despite warnings of an inflation surge. Mr Sunak said the Tory manifesto "triple-lock" state pension guarantee remains Government policy despite the pressure of the Covid crisis. He refused to rule out spending an extra £4billion-a-year to ensure the state pension is pegged to wage rises that have been forecast to soar by up to eight percent.
Inflation hit 2.1 percent in May, the highest for almost two years with higher prices for clothes, fuel and dining out leading the surge.
Speaking on new TV channel GB News to Andrew Neil, the Chancellor said: "I want to deliver what's in the manifesto. It's precisely because we want to deliver those promises that we've had to make some difficult decisions to get the public finances back on track."
Mr Neil challenged him to stick to the triple lock, which guarantees that the state pension rises by the highest figure out of wages, prices or two percent.
The broadcaster pointed out that rising inflation could mean significant wage increases that would make the pledge more costly to deliver.
Mr Sunak backed the policy while accepting an official review of pensions will be held later this year.
In a recent report for the Sunday Times, though, personal finance journalist Ali Hussain claimed only one in eight savers will be safe from a sharp rise in prices.
He explained: "Just 9,200 pensioners protected their income from inflation last year, leaving most annuity holders exposed to the recent surge in the cost of living.
"This compared with 60,300 who opted to protect their income from inflation in the 2019-2020 tax year, according to the Financial Conduct Authority, the City regulator.
"Over the past five years the ratio of those who do not protect their income to those who do has been about seven to one.
"The number who are paid a fixed amount that is not inflation-proofed is 300,200, compared with only 44,600 who protected their money by opting for a lower initial sum that rises each year."
Savers approaching retirement, Mr Hussain noted, are now being urged to protect their income from inflation after the cost of living index jumped to its highest level since November 2018.
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Pension specialists LCP told Mr Hussain inflation will effectively erode one quarter of the value of a level annuity in 14 years if the rate stays at 2.1 percent, but will take 40 years with inflation at 0.7 percent.
Steve Webb, a former pensions minister who is now a partner at LCP, said: “Compounded year after year, even a small increase in inflation can rapidly eat away at the spending power of your annuity.”
Mr Webb added that inflation-proofing “may be especially relevant for those in good health and expecting to be drawing their annuity for several decades”.
This week, an Express.co.uk poll asked readers whether the "triple-lock" state pension guarantee should be broken if pensions were to rise by eight percent.
Out of the 6,825 responses to the poll, a staggering 87 percent said the triple lock should not be broken under this circumstance.
However, not all shared this opinion with some 12 percent of individuals stating the triple lock should be broken if the percentage were to rise substantially.
Some were unsure, with one percent of respondents stating they did not know.
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The poll also posed that if an eight percent rise in the state pension was considered too high, what would be the maximum acceptable rise.
A total of 5,268 people answered to this element of the poll, and opinions were split on the matter.
While 3,053 people said seven percent was the maximum acceptable rise, five percent was the next most popular option for 671 of respondents.
The vote share was fairly even between the six percent, three percent and four percent options - all expressed by roughly 200 people.
But a large number of people - 634 to be exact - stated they weren’t sure about what the maximum acceptable rise should be.
Many Express.co.uk readers were quick to defend the potential for an eight percent rise to the state pension in the coming tax year.
A number of people cited that a promise had already been made through the Triple Lock Mechanism, and it was now the responsibility of the Government to ensure this was being achieved.
While others said it was the hard work of older generations which meant an entitlement to a state pension increase should be honoured.
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