Aegon: Soaring inflation of 5.4% piles pressure on Government to ease the cost of living crisis

Photo of Steven Cameron
Steven Cameron, Pensions Director at Aegon.

State pensioners and those on benefits facing ‘one step forward, two steps back’

Steven Cameron (pictured), Pensions Director at Aegon said:

“December’s inflation increase of 5.4% comes a year after inflation was 0.6% in December 2020, just above zero. One year on, households are facing an ever worsening cost of living crisis with inflation at the highest rate for almost 3 decades, making it higher than under 30s have experienced in their lifetimes. What’s worse is there’s no short-term respite in sight as without Government intervention, the energy price cap is rise set to drive inflation even higher in the spring, coupled with a National Insurance hike and income taxes on the rise due to frozen thresholds.

“Individuals across the generations are concerned about rising prices. Aegon research showed almost two in three adults were worried about the impact of rising prices on their personal finances even before the increases over the last two months.

“Today’s further increase will put even more pressure on the government to offer some respite to the millions of households facing a cost of living squeeze. State pensioners and those receiving benefits are in the spotlight with increases based on September’s inflation rate of just 3.1%. With inflation now approaching double that at 5.4%, it could be a case of one step forward but two steps back as state pensioners and those on benefits may see the coming April increase wiped out twice over in terms of their purchasing power.

NI increase needed to help long term social care funding crisis

“The Government is facing a barrage of calls to think again, whether to grant a higher increase to state pensioners, to reduce taxes on fuel or to defer April’s National Insurance increase. If fuel price hikes are seen as temporary, a limited period of tax reductions there would be welcomed. However, deferring the increase in NI will only worsen the crisis in social care funding, which it’s designed to address. Time is also running out for any improvement on the 3.1% state pension increase, with any movement there putting further pressure on today’s working population who pay for this through today’s National Insurance.”

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