On the 20 October we reported that the ONS announced the Consumer Price Index (CPI) for September at 3.1%.
This is important as it will determine the increase to Armed Forces pensions in payment, and the uplift to deferred pensions for those that have left service but have not yet got military pensions in payment.
With the dropping of the triple lock this also seems likely to be the rate of rise for those in receipt of a state pension.
Whilst a 3.1% pay rise for pensioners is of course welcome, and indeed may seem generous given low rates of interest currently available on savings, it is worth exploring in more detail between now and April 2022 (when the increase happens).
First, it should be acknowledged that inflation appears to be rising. In particular, the costs of many of the items in a pensioner consumer’s basket (heating, food etc) are expected to rise at an accelerated rate in the months ahead. This means that 3.1% might not feel so generous by the time it comes in.
Also, with the Armed Forces suffering a pay freeze this year, it seems likely that if this is extended, we could see a repeat of instances of the pensions trough which was suffered in years gone by when inflation runs high at the time of a public sector pay freeze. The pensions trough meant that someone could leave service and enjoy a higher pension, because of the rise in CPI, than their counterpart who remains in service, and sees little pension increase (because of the pay freeze).
The next big date on our horizon is January 2022 when these pension increases are formalized in law, and also when the rate of increase to “in service AFPS15 benefits” are announced (linked to the Average Weekly Earnings index).
FPS will continue to monitor these developments and members should watch our social media and website for further announcements.