The Government has already confirmed that the ‘Triple Lock’ will remain in place for state pensions. This means with inflation on the increase, the state pension will increase with it.
For September, with this almost ‘nailed-on’ to be over 10%, the state pension will increase to over £10,000 for the first time.
Income in retirement is normally made of both guaranteed and flexible income. Guaranteed income is received from: state pensions, Defined Benefit pensions, annuities, and (to some extent) rental income. Flexible income derives from investments and pension drawdown plans. Flexible income, for many, needs to be increased to cover the extra cost of living.
For those who have retired in the last five years, their experiences have been far from what was expected.
Strong investment growth and low inflation have been replaced with high inflation and investments that have been hit first by Covid, then by the Russian invasion of Ukraine, and now by increasing interest rates.
Given the state of world economies, the movements could have been expected to be in a far worse place than they actually are.
Many large household companies have seen their share values drop by a third. And with, as yet, no solution to avoid inflation (other than seeming to keep putting up interest rates), you would expect everyone to be in a deep recession with high unemployment. For now, this is not the case. That said, recession and high unemployment rates are being spoken about as something people should expect next year.
Companies today need to have deep pockets as overheads are increasing way beyond any ability to increase prices. Wage demands (although often justified) will make matters worse.
For countries borrowing to spend their way out of problems, it is expensive with rising borrowing costs- but what is the alternative? For those used to living on fixed or guaranteed incomes, maybe a 10% state pension increase will help a bit, but with most costs increasing, this may still not be enough.
If you wish to review your options, our highly qualified financial experts are here to help.