The announcement that September’s RPI has now hit 5 per cent means that pensioners can look forward to this rate feeding through to their pensions next April.
Currently, the Basic State Pension is £90.70 a week and the increase of 5 per cent will provide a boost of £20 a month.
The September RPI announcement is the figure used to calculate what the Old Age Pension will increase to for the coming 2009-2010 tax year.
Commenting, Hargreaves Lansdown’s head of pensions research Tom McPhail says the rate announcement should be “good news for pensioners, particularly as there are strong indications that inflation will be falling off by next April”.
He warns though that a possible risk for pensioners is that the current pressure on Government finances might prompt the Chancellor to hold back some of this rate increase.
The Bank of England projections back in August indicate that by the time this pension increase is delivered in April next year, inflation will already have fallen back below 4 per cent, McPhail says.
He adds that inflation has not been this high since July 1991 and in 2000 pensions increased by just 75p after inflation figures the previous September rose by a mere 1.1 per cent. However, back in September 1975, inflation hit a high point of 26.6 per cent.