Pension: Expert discusses state pension tax
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Last week, calculations carried out by Express.co.uk found the state pension would rise to £186.6 per week if there was a 3.9 percent increase next year. This amount equates to around £9,700. The latest Consumer Price Index (CPI) figure – which will be used to determine the inflation element of the triple lock – will be released next week. When compound interest of 2.5 percent is included for every year up to 2050,, Britons who are entitled to the state pension would get £19,856.70. The full new state pension is currently £179.60 per week.
For over a decade, the UK Government has pledged to raise the state pension every year by either the rate of Consumer Price Index (CPI) inflation, or average earnings inflation or 2.5 percent. This is commonly known as the triple lock and whichever amount is the highest ends up being the rate pensions are increased by. Despite this promise from the Government, plans have been outlined to temporarily scrap the triple lock due to average earnings in the UK being artificially inflated following the furlough scheme. In lieu of this, the Government has promised a “double lock” which will see pensions increase by either 2.5 percent or the rate of inflation
According to a report by the National Institute of Economic and Social Research (NIESR), the UK’s CPI inflation is set to jump to 3.9 percent next year. Despite Britons set to see a rise in their state pension payments, upwards of £20,000 by 2050, many experts are warning living costs are set to rise dramatically. Speaking to Express.co.uk, former Pensions Minister Steve Webb said: “Although the state pension will presumably rise over a period of decades to nearly £20,000 a year, this obviously won’t mean that pensioners would by then be living in the lap of luxury. Prices will also rise substantially over the coming decades and living standards only increase when the pension rises by more than inflation.
Reacting to this development, many Express.co.uk readers are expressing their anger over how state pensions are being dealt with by the Government. One reader, with the username Citizen Smithie, said: “All this means is that we are more than 30 years behind pensions paid in France and Germany.” Another reader named Arrongrant added: “In 2050, it will still be lower than some countries are paying their pensioners today.” One user named Cookyz called for an improvement on the state pension, writing: “Most elderly pensioners of today will be long gone by then. I certainly will, so it’s of no comfort for me. I would like a better pension now.”
Citing Sir Steve’s reference to rising living costs, “itsmeoncemore” said: “By 2050, £20,000 will be worth £10,000 or less with the rising costs of living. They should stop giving away taxpayers money to other countries or on silly schemes on how to lose weight and other ridiculousness. They should stop charging people National Insurance when they have paid it for 35 years.” Another reader named fozzone penned: “I thought the Minimum Living Wage in the UK is £1598.69 per month.
“Then how can they expect pensioners to live on £808.60 per month assuming they are receiving the maximum of the new pension rate. The Government is keen to quote fairness and equality. This was highlighted with the triple lock suspension for a year. Then to be fair they should equalise pensions with minimum wage levels as this is what the government state is what is needed to live on. Perhaps a better idea would be to equalise MP salaries with the pensions rate of £808.60 per month and see how they survive on that.” Chancellor Rishi Sunak is likely to clarify his plans for the state pension on October 27, 2021 as part of his autumn Budget announcement.
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