Inflation is running high. In the year to September, prices were 3% up on a year ago – making it the highest annual rise for around five years. Apparently, it was down to higher food and fuel prices as well as more expensive theatre tickets. And the increase would have been even higher had it not been offset by cheaper clothes, apparently.
Given that I managed to spend £70 in the supermarket yesterday and hardly filled two bags, rising inflation is hardly a surprise to me. But there a good side to higher inflation – at least, there is for some people. This is because September’s inflation figure is the one used in the following April to uprate pensions and some benefits. The 3% inflation figure means that from next April, the state pension will (probably) go up from its current £159.55 a week to £164.33. This will be the largest pension increase for six years.
The ‘probably’ is important because at the moment at least, state pensions increase each year depending on the ‘triple lock’. Under this system, the rate the state pension goes up in April is the highest out of the September inflation figure, earnings growth or 2.5%. Currently it looks like September’s inflation figure will be the highest of the three – hence the 3% increase expected in state pensions from April. However of course next month there is the Budget – which could presumably change things.
And there is another positive side to higher inflation – although only if you are a saver rather than a borrower. It means there is more chance of the Bank of England putting up base rate in the near future – which should mean better savings rates. Of course, it would also mean higher mortgage rates. So, basically, this week’s inflation news is good if you are a non-driving, non-theatre going pensioner who likes buying clothes, eats little and has savings. But if you are a homebuyer who drives, eats and is years from retirement – so probably most mothers – then higher inflation is bad news.
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