The full new state pension will cover just a quarter of the required income in retirement, as it rises to £9,628 from Apr 11.
Sir Steve Webb, a former pensions minister and now of LCP, said: “The very low state pension increase means pensioners will have to dig deep into their savings if they want to protect their standard of living this year. This clearly increases the risk of people running out of money either now or later in retirement.”
Richard Eagling of comparison website NerdWallet said an additional 200,000 people of pension age fell into relative poverty last year and many more face financial ruin because the state pension has failed to keep pace with prices.
This month’s £693 rise in annual energy bills alone will cost a whole month’s worth of the average pension payment made by the government, figures from the Department for Work and Pensions showed.
Mr Eagling added: “The smaller increase to the state pension this year will do little to offset the cost of living crisis that many retirees face. We can expect this situation to deteriorate further.”
The new state pension will rise by £5.55 a week to £185.15 while the basic state pension, received by those who retired pre-2016, will rise by £4.27 a week to £141.85. The state pension is paid to 12 millions over-67s. This Government broke its promise on the triple lock to raise the benefit by the highest of inflation, earnings growth or 2pc. In September, when the DWP made its decision, inflation was just 3.1pc but earnings growth was 8.1pc.
The Treasury will save £10bn in the 2022-23 tax year by ignoring the earnings link. Meanwhile, the taxman expects to receive £800m more every year due to pensioners taking more money out of their private savings, according to the Office for Budget Responsibility, a spending watchdog.
