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Despite promises, inflation could harm state pensions

By Western Daily Press  |  Posted: October 17, 2012

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Hundreds of thousands of West senior citizens will lose out because of changes in the way state pension rises are calculated, campaigners warned yesterday.

They spoke out as a charity revealed the number of young people out of work longer than two years has soared – with parts of the West among the hardest hit.

Official figures published yesterday showed consumer prices index (CPI) inflation fell to 2.2 per cent last month, the lowest level since November 2009.

The timing of September’s inflation fall is bad news for basic state pensioners and those on benefits, as the Government uses the figure to calculate their increases for next April.

The state pension of £107.45 cannot go up by less than 2.5 per cent under coalition Government rules, so it is likely to increase by just under £2.70 a week.

Last September CPI inflation was 5.2 per cent, so the pension went up by £5.30 this year, while benefits will also go up by much less.

Chancellor George Osborne will announce his decision in December, but benefits such as jobseeker’s allowance and income support will probably rise 2.2 per cent.

The National Pensioners Convention said millions of older people would lose out because the coalition changed the rules last year, and no longer went by the retail price index (RPI).

That stood at 2.6 per cent, so a pensioner with a full state pension would miss out on £5.20 over a year, while millions of older women who do not qualify will get just £1.60 more a week. And the state second pension, and millions of public sector pensions, will increase by 2.2 per cent, rather than 2.5 per cent.

The NPC’s Dot Gibson said the difference might not sound much to Government ministers, but over two million pensioners were living in poverty, and many more struggling to make ends meet. “The change from the RPI to the CPI was a cynical move that almost overnight weakened virtually every single pension scheme in the country,” she said. “Its effect will be far reaching for years to come as people see their incomes fall by around 15 per cent over just ten years.

“This decision will only add to the hardship that millions of Britain’s pensioners already face, coping with one of the least adequate state pensions in Europe.”

Labour Treasury spokeswoman Cathy Jamieson said the fall in inflation was welcome, but pensioners and families faced a real squeeze from big hikes in energy and food prices in the coming months.

“Millions of families and pensioners will be worse off because of the 3p rise in fuel duty and cuts to child benefit in January, and the granny tax which comes in on the same day that millionaires get a tax cut in April.”

The Treasury said the fall in inflation would bring “welcome relief to the budgets of families and businesses”.

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