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Good times for a change - Septembers inflation rate is 3.1%

The Office of National Statistics (ONS) has today announced that the Consumer Prices Index for September is 3.1%. This is 1.1% over the Bank of England’s 2% target but rather than being the cause of dismay, for many older people today’s announcement is good news, albeit not as good as it could have been.

Septembers index is used to calculate the rate at which benefits increase, so this means that in April 2011, benefits such as Attendance Allowance and Disability Living Allowance should all rise by 3.1%.

The coalition governments decsion to calculate benefit increases on the lower CPI rather than the previous Retail Prices Index (RPI), which includes an allowance for housing costs, has meant people receiving benefits have lost around a third of the increase they would have had under the old system.

It’s better news for pensioners but only for this year. The state pension is still based on the RPI with pensions increasing by the higher of 2.5% or the RPI the previous September. RPI for September was 4.6% but this only applies for the basic state pension. State second pension, other pension benefits and public sector pensions are all now based on the CPI and the state pension will move to CPI next April.

We’ve been busy with our calculators today to work out what this would mean in pounds and pence if these increases go through in April. Here are our results.

All of this is still subject to the comprehesive spending review on 20th October and we’ll advise if anything changes.

Posted in The carefeesadvice Blog

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