Retired households struggling with the growing cost of living crisis could be in line for a vital £700 lifeline, figures suggest.
Unfortunately, this will only arrive in April 2023, leaving many retirees facing a difficult 12 months as the rapid rise in living costs continues to eat into their income.
As Steve Webb, partner at pension consultants LCP, explains: “Pensioners are set to face a financial rollercoaster with a tough squeeze this year followed by a catch-up next year.
“The Spring Statement will have been a big disappointment, and some pensioners may find themselves having to apply to their Council for hardship funds simply to make ends meet.
“But next year should see the biggest ever cash rise in the value of the state pension, as pension rates catch up. The problem is that ‘jam tomorrow’ will not pay bills today”.
Let’s take a closer look at what’s likely to happen to retirees’ finances.
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PROMOTION
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Bumper pay rise in 2023?
LCP has crunched the number and worked out that the UK State Pension could rise by a whopping 7.5% in April 2023 based on forecasts from the Office for Budget Responsibility, the spending watchdog.
We should stress this is just an estimate – we won’t know exactly what the rise will be for a few months.
But, if correct, it would represent the largest-ever rise in history and equate to a pay rise of almost £700 (depending on which State Pension you qualify for) over the course of the year.
LCP adds that the following year could see the State Pension soar past £200-a-week, providing vital help to cash-strapped households.
While this sounds promising, the reality is many of these households are already facing huge challenges right now – and, worryingly, there’s far more pain to come this year.
Bills are going to keep rising
It’s no secret that things have been tough in recent months.
Energy prices jumped sharply just as the temperatures started falling last year, fuel bills have rocketed while we’re paying far more at the supermarket tills.
It’s resulted in a huge squeeze on income, but the stark reality is this is only the start.
Even though retired households will escape the pain of the NI hike, there are many, many other rising costs they’ll have to contend with.
Energy prices have just rocketed by 50% for millions, something most will only really notice when their next monthly energy payment is taken.
Households will have recently received their first Council Tax bill of the new year, with many realising they’ll have to find up to an extra £90 this year.
Food prices are forecast to keep rising throughout 2022, and of course there’s another energy bill hike due in October, meaning next winter will be especially brutal.
There have, of course, been some handouts to try and ease the burden, but many of these will be of little use to pensioners.
“The coming twelve months are set to be one of the toughest on record for many pensioners,” LCP said in a release.
“The National Insurance changes – the biggest giveaway [in the Spring Statement] – offer nothing to retired pensioners
“The 5p fuel duty cut will mainly benefit those who are in work and who drive regularly,” it adds.
It suggests that struggling pensioners should contact their council if they’re struggling to make ends meet as the chancellor did announce an extra £500 million for local authority ‘hardship funds’.
“Pensioners in the direst need will be able to approach their local authority for support, almost certainly on a means-tested basis, with each Council making up its own scheme.”