Chancellor told to rethink suspension of triple lock system and more of this week’s finance news

Chancellor told to rethink suspension of triple lock system and more of this week’s finance news

 · 10 min read
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This week, Chancellor Rishi Sunak was told to rethink the state pension triple lock suspension. We also found out what is happening with interest rates, how thousands of older people are still being affected by state pension delays, and how toy retailers are hoping grandparents will splash their cash on the grandkids this Christmas.

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Earlier this week, there was some potentially good news for pensioners after the House of Lords told ministers to rethink the suspension of the state pension triple lock.

The system was due to be suspended for the 2022/2023 tax year because of the Covid-19 pandemic driving average earnings growth to abnormally high levels. Under the triple lock system, pensioners would have received a state pension increase of 8.3%. However, after the suspension was agreed, the figure was set at 3.1%.

The anomaly with earnings growth figures was caused by many people coming off furlough and returning to work. Without the suspension of the triple lock system, pensioners stood to gain up to £14 per week on their pension payments based on these earnings growth figures.

Suspension of triple lock system at risk

According to reports, the suspension of the triple lock system may now be at risk. While this spells bad news for the Treasury, it is a move that will be welcomed by pensioners across the nation. The suspension of the triple lock system is said to be saving the government around £5billion.

Calls to keep the triple lock system in place have been led by Baroness Altmann. She said that the system should still be used instead of being suspended, but amendments should be made to consider the impact of the pandemic. This resulted in a defeat for ministers, with the vote being backed by 220 votes to 178.

One of those to speak at the House of Lords was Baroness Natalie Bennett, former leader of the Green Party. She said, “When we're talking about £14 a week, there are a relatively small number of people in our society for whom £14 a week is small change. There are very large numbers of people and very large numbers of pensioners, for whom that's literally a matter of life and death.”

In a Twitter post, John McDonnell, former Shadow Chancellor of the Exchequer, said he would support keeping the triple lock system in place. He wrote, “Thatcher broke the link between pensions & earnings forcing millions of pensioners into poverty. I campaigned for 30 years to restore the link with earnings. That’s why I will vote to keep the triple lock.”

Interest rates remain on hold, but a hike is still on the cards

At this week’s Monetary Policy Committee meeting, the Bank of England decided to keep interest rates at their record low level of 0.1%. This came amid expectations from investors that interest rates would be hiked as the pandemic continues to ease. Many were expecting the UK to be among the first of the world’s major economies to act in light of soaring inflation.

While the Bank of England has now confirmed that interest rates will not change, it did indicate that they would have to be increased in the near future. If the economy performs as expected, interest rates are likely to be increased in the coming months.

Majority vote to keep interest rates on hold

There was a majority vote to keep interest rates on hold, with seven of the nine committee members voting for this. According to reports, they wanted to see how unemployment rates were affected following the end of the government’s furlough scheme before increasing interest rates.

Two of the committee members voted for the rate of interest to be increased immediately by 15 basis points: the Deputy Governor, Dave Ramsden, and committee member Michael Saunders.

The decision comes as good news for those with mortgages, with many worried that their mortgage interest rate would be hiked. Some banks and lenders had already increased rates on mortgage deals in anticipation of a rate increase being announced.

However, the decision to keep interest rates on hold will hurt those hoping to earn more interest on their savings. The low interest rates on savings accounts have been heavily outweighed by rising inflation.

According to former Royal Institute of Chartered Surveyors chairman Jeremy Leaf, an interest rate hike would have considerably impacted the housing market. He said, “Activity and price growth has been slowing since government support schemes started winding down.” 

He added, “An interest rate rise would compromise confidence for some, particularly first-time buyers on tight budgets concerned about the future direction of travel of rates. As the housing market is built on confidence, a rate rise, and perhaps two or three more to follow, would inevitably have an impact on activity.”

Thousands still affected by state pension delays

Thousands of recently retired people are still being affected by delays in the processing of their state pensions. This comes despite a catch-up exercise put into place by the Department for Work and Pensions to try and get through the backlog that has left many new retirees struggling financially.

While most pensions delayed due to the processing backlog are now being paid to new retirees, there are also thousands for which the DWP needs more information. According to recent reports, there are close to 5,000 applications that have not yet been processed while the department awaits further information from applicants.

Problems occurred due to staffing issues

Previously, the DWP said staffing issues stemming from the pandemic had led to the initial delays with processing applications for the state pension. This led to administrative problems, which meant thousands of people turning 66 did not get their state pension payments in time.

For many new pensioners, this caused huge problems as they were no longer receiving any income from work but were also not receiving their state pension. Many reported that the situation had caused them untold amounts of stress and financial difficulties.

As a result of the problems, the DWP redeployed hundreds of staff members to deal with the backlog of pension applications. However, based on these figures, many will still be left waiting.

A spokesperson for the DWP said, "We are sorry that some new customers have faced delays receiving their state pension. We have now issued all outstanding payments and are in contact with those customers where more information is required in order to complete processing."

Toy retailers hoping to cash in on grandparents’ generosity

Toy retailers across the UK are relying on the generosity of grandparents this year to boost sales. Last year, families could not meet over the Christmas period other than on Christmas Day, which had a significant impact on the retail industry over the festive season. There were also other Covid restrictions in place that negatively affected the industry.

This year, toy retailers are hoping to bounce back, and it has been revealed that they are hoping grandparents will be splashing their cash on toys for their grandchildren. This comes as parents are under increased financial strain due to rising inflation and tightened household budgets.

Grandparents expected to spend more on presents

With family gatherings and festivities returning this year, toy retailers expect a boom in sales, with the reopening of the High Street positively impacting the industry. Spending on toys and gifts for children by grandparents is expected to rise this year, with one analyst predicting that grandparents will play a more prominent role in purchasing toys this year.

In addition to changes in who purchases gifts and toys for children, there have also been changes in the types of toys purchased and how they are purchased.

For instance, last year, the sale of toys online boomed compared to High Street shops. This was partly down to Covid restrictions, with some shops remaining closed and many people still unable or unwilling to go out shopping.

This year, it is thought that the trend will reverse with an increase in the number of toys being purchased from brick-and-mortar shops. This is partly down to more shops now being open compared to last winter. It could also be affected by the fact that many older grandparents prefer to make their purchases in person rather than online.

More UK energy firms collapse as wholesale gas prices soar

Thousands more energy customers in the UK are expected to be hit by higher energy costs as four more energy firms have collapsed. This takes the total number of smaller energy companies that have gone bust since August to 19.

The latest collapses come amid soaring wholesale gas prices. In total, close to 24,000 customers, both domestic and non-domestic, will be affected. The firms that have gone bust are Zebra Power Limited, Omni Energy, Ampoweruk Ltd, and MA Energy.

The companies have been unable to meet promises to customers regarding energy prices due to the rise in wholesale gas, resulting in the firms going under. This has then sparked fears of huge bill increases for those who will now be moved to new suppliers.

Bad timing for customers

The collapse of the 19 firms over recent months has come at a terrible time for customers who will now be left struggling with higher energy bills. Many are already finding it difficult to cope with rising living costs. Being moved over to energy firms that have hiked their prices will put further financial strain on many people.

In addition, these smaller energy firms started to go under toward the end of summer when the colder weather was drawing nearer. With millions of households set to see their energy usage increase over the autumn and winter months, this could have a huge impact on those who have to be moved over to a new energy supplier due to the collapse of their old one.

When an energy firm goes bust, Ofgem places its customers with other energy suppliers automatically. While the customer can then shop around for better deals and switch again if they wish to do so, this can take time. In the meantime, customers are left facing higher bills as they try to keep their homes warm over the winter.

An additional difficulty is created by the lack of choice available to customers whose energy firms go bust. Many of the smaller ones with cheaper tariffs have collapsed, which often leaves customers with only the larger and more expensive suppliers to choose from.

The Director of Retail at Ofgem, Neil Lawrence, said that they were prioritising protecting customers and urged people not to worry.

He said, "I want to reassure affected customers that they do not need to worry; under our safety net we'll make sure your energy supplies continue. If you have credit on your account, the funds you have paid in are protected and you will not lose the money that is owed to you."

Image Credit: TheDigitalArtist at Pixabay

Reno Charlton
Reno Charlton
Reno joined Age Group in 2020 and has nearly 20 years of writing experience. Although she specialises in writing about finance topics and covering finance news, Reno is also a published author and has written several children's books and short stories.
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