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14 Oct 2015

UK pensioners to benefit from returning negative inflation rate

Official data has shown that inflation has once again turned negative in the UK, meaning that pensioners will benefit more than individuals on other state benefits, the Financial Times reports.

According to figures from the Office for National Statistics (ONS), prices fell by 0.1% year-on-year in September.

As a result of this, benefits that relate to inflation will not increase in the next financial year; however, because state pensions operate under a ‘triple lock guarantee´ - rising by whichever is greatest out of earnings, prices or 2.5% - pensioners will receive more money next year.

The numbers indicate that annual earnings increased by 2.9% by Q2 2015, which, according to calculations by the Financial Times, means that state pensioners can expect to receive more than £170 in additional payments.

The near-zero inflation levels and wage increases can be attributed to a resurgence in confidence among consumers, say economists.

But the return of deflation - only the second time this has happened to UK consumer inflation since 1960 - isn´t good news for everyone, including those on disability benefits or care allowance, whose payments will not increase, and individuals on public sector pensions.

Katie Schumecker, policy and research manager at the Joseph Rowntree Foundation, explains that the news means there is now an even bigger disparity between how pensioners and other working-age recipients are treated by the benefits system.

In fact, the Institute for Fiscal Studies (IFS) notes that some 14% of government spending is targeted towards older citizens, while just 5% is spent on families and children.

The organisation also predicts that the government´s plans to freeze benefits from 2016 will save around £4 billion in spending.

Copyright M2 Bespoke 2015

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