This would be the single biggest increase ever and could see the new State Pension top £10,600 a year. However, those who retired before April 6, 2016, on the old State Pension will get a smaller increase.
Yesterday, the Bank of England forecast that inflation would hit a staggering 10.25 percent in the fourth quarter.
That would be the highest rate of consumer price growth since 1982, taking the cost of living crisis to terrifying new heights.
Yet there should be a silver lining for pensioners, as Chancellor Rishi Sunak has indicated that he will restore the triple lock next year.
That guarantees to increase the State Pension by inflation, earnings or 2.5 percent, whichever is highest.
Inflation is on course to be the highest of the three by far, handing State pensioners a bumper pay rise. This will partly make up for Sunak’s decision to suspend the triple lock lot for the 2022/23 financial year.
The key month to look out for is September. That’s the monthly inflation figure the government uses to calculate the triple lock inflationary uplift.
Previously, the Bank of England had predicted inflation could hit 7.4 percent in September. This would have lifted the full new State Pension from £9,627.80 to £10,340.25 a year.
Yet the BoE has consistently underestimated the inflationary forces gripping the UK. It spent most of last year claiming inflation was “transitory”, despite repeated warnings to the contrary.
Yesterday’s announcement that inflation is now on course to hit 10.25 percent in the autumn is an admission of failure.
The BoE now admits inflation is set to hit that level in the fourth quarter, which means the three months from October to December. It could get there sooner than that.
READ MORE: New state pension warning – get forecast now or risk shortfall.
UK inflation rocketed to seven percent in March and is expected to top eight percent when April’s figure is published.
In the US, it is already at 8.5 percent and Victoria Scholar, head of investment at Interactive Investor, said: “Inflation is rising all over the world, and picking up speed.”
The main driver is rocketing energy prices and they may now accelerate further, as the EU finally gears up to embargo Russian oil and gas.
Inflation could easily hit 10 percent by September and that would lift the new State Pension to £10,590.58 a year. That’s an increase of £962.78, for those who qualify for the maximum amount.
If inflation hits 10.25 percent by then, the new State Pension would jump by £986.85 to £10,614.65. That’s a rise of almost £1,000.
So state pensioners could finally receive some good news.
Those who retired before April 6, 2016 on the old basic State Pension will get the same percentage uplift. However, this will be on a smaller sum, as the old State Pension is lower.
It currently pays £7,376.20 a year, so if inflation does hit 10% in September that will increase to £8,113.82 from next April.
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Most analysts expect inflation to fall back next year, which could also work in favor of pensioners.
Laith Khalaf, head of investment analysis at AJ Bell, said: “The Bank of England is now forecasting that inflation will run at 6.6 percent next year.”
If pensioners did get a bumper 10 percent triple lock increase but inflation fell to 6.6 percent in the spring, they would get a real terms pay rise in the 2023/24 tax year.
This would offer some consolation for Sunak’s decision to impose a reduced State Pension increase of just 3.1 percent this April.
It’s a rare moment of hope for cash-strapped pensioners. Unfortunately, we won’t know for sure until the September inflation figure is in.
This year will still be unbelievably tough, either way.