UK STATE PENSION RISE 2022 & What Has Happened to CPI & RPI? The official increase in the UK State Pension from April 2022 will be 3.1%. This is due to the increase being aligned to the suspended triple lock meaning that average earnings will not be included in the test. Therefore the remaining two parts to this is the greater of CPI or 2.5% guaranteed minimum. CPI came in at 3.1% in September largely due to increasing transport costs and dragged down slightly by the cost of restaurants and hotels. And interestingly RPI, for those whose pensions are still based off of that measure came in at an eye watering 4.9%. As a reminder RPI includes mortgage interest payments and is therefore heavily influenced by house prices and interest rates. CPI on the other hand takes into account all other goods and services but not housing costs. Therefore CPI being the higher amount the full New State Pension, so remember based on 35 qualifying years will increase from £9339 per year to £9,627 per year, which works out on a weekly basis to be £185.15 per week. Those on the old basic state pension, those that reached state pension age before April 2016 will see their weekly payments go from £137.60 to £141.85. The suspension of the triple lock is temporary to address the volatility in the average earnings figure that was largely due to the recovery in earnings post the lockdowns. Had the triple lock not be suspended then the increase to the state pension would have been a whopping 8.3%. The following table shows how the triple lock has been applied since 2012 with a fairly even split between the various measures put into place and showing how low inflation has been running with the guaranteed minimum being relied on at least 4 times. The CPI figure not just being relevant to the state pension but also for those with public sector final salary pension schemes the september CPI figure is used to determine how much the NHS, teachers and civil service schemes will rise by next year for those in receipt of pension payments or deferred members. Also to determine increases in universal credit, attendance allowance, income support etc. And not to forget that RPI, at 4.9% is still the figure used for some final salary pension schemes and also for tobacco and alcohol duty, train tickets, mobile phone tariffs, car tax and some index linked bonds. If you were a little cynical it does look a little like the government links its spending to CPI and some of its taxes or income generators to RPI. And I think we can all guess which tends to the higher and which tends to be the lower. Otherwise known as ‘inflation shopping’. And probably for another video but the government is likely to move to CPIH at some point in the future. 🗒 Please note: The information provided is based on the current understanding of the relevant legislation and regulations and may be subject to alteration as a result of changes in legislation or practice. Also it may not reflect the options available under a specific product which may not be as wide as legislations and regulations allow. All references to taxation are based on my understanding of current taxation law and practice and may be affected by future changes in legislation and the individual circumstances. This channel is for information and education purposes only. Any information or guidance given does not act as financial advice. Please consult a financial adviser if you are unsure in anyway. Keep in mind that the value of your investments can go down as well as up, so you could get back less than you invest. ⭐ My aim is to provide education and guidance to help individuals understand pensions, investments and protection. #ukstatepension #financialplanning #pensionplanning...(read more)
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