22 March 2022

Spring Statement: Pressure on Chancellor to deliver help with rising costs

5 min read

Royal London comments on the Spring Statement 2022.

Pensioners – is the triple lock sustainable?

Jamie Jenkins, director of policy and external affairs at Royal London said:

“It’s not just workers that will see pressure on their incomes this year. Those receiving their State Pension, the bedrock of a retirement income for many, will also be worse off as a result of the suspension in the triple lock, the formula that sets the yearly State Pension rise.

“From next month, pensioners will receive an increase of 3.1% in their State Pension, instead of the 8.3% they would have received if the earnings component had been included. This will impact older people who will already be spending a higher percentage of their income on food and fuel.

“The Government has committed to resuming the triple lock this year, but rising inflation could present a similar dilemma to the earnings figure last year, if it reaches the levels some have predicted. This would almost certainly lead to further pressure for the triple lock to be reviewed.”

Time to defrost the Lifetime Allowance?

Justin Corliss, senior pension technical manager at Royal London, said:

“In the last few Budgets the pensions lifetime allowance rose each year in line with inflation, but the Chancellor then froze it at £1,073,100 until 2025/26.  In a low inflation environment this freeze has less of an impact, but with inflation rising significantly, the impact could be much greater. Many more people could be caught by a tax charge, including a greater number of NHS doctors. This could lead to more early retirements and reduced working hours to avoid the charge, at a time when doctors are in very high demand.

“So a tax charge, designed to impact only a small number of individuals, will be felt more broadly by society and there will be pressure to reinstate the inflation link.”

Paying more with less – National Insurance increase on top of rising prices

Sarah Pennells, consumer finance specialist at Royal London, said:

“At a time when 95% of adults in the UK are worried about the cost of living, next month’s increase in National Insurance contributions is set to take many by surprise. Just as energy and other household bills are rising steeply, workers will see a fall in their take home pay as a result of the chancellor’s increase in National Insurance contributions to pay for social care proposals. The increase of 1.25% may seem relatively low, but in reality an individual on a salary of £30,000, will see an extra deduction of £214 a year, or £464 for someone earning £50,000.

“While two fifths (43%) of workers say they’re aware of the increase but unprepared to cope with it financially, bigger deductions in their pay slips from next month will be completely out of the blue for a fifth of workers.”

 

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About Royal London

Royal London is the largest mutual life insurance, pensions and investment company in the UK, with assets under management of £150 billion, 8.8 million policies in force and 4,262 employees. Figures quoted are as at 30 June 2022. Learn more at royallondon.com