UK consumer price inflation increased from 2.9% in August to 3% in September the highest rate seen since April 2012, according to figures released today by the Office for National Statistics (ONS).
This is higher than both the latest wage inflation figures of 2.1%, and the 2.5% underpin used to determine how much the state pension rises by each year under the triple lock guarantee.
Retirees are therefore likely to see their state pension increase by 3% in April next year, with their weekly income rising from approximately £159.55 a week to £164.33, despite the current squeeze on real wages.
This will bring the issue of intergenerational fairness further under the spotlight, and comes amid rumours that the chancellor is looking to cut tax relief for pensioners in his November budget.
"Today's numbers will produce a relatively generous increase to the state pension," Hargreaves Lansdown head of policy, Tom McPhail, said. "Our only hope is that the chancellor doesn't look on this as an excuse to raid pensions taxation."
The lifetime allowance is also set to increase in accordance with the latest inflation figures, meaning that the maximum amount of pension benefit that can be drawn from schemes will rise to £1,030,000.
For those above the current limit of £1,000,000 and without protection, the increase will cut their lifetime allowance excess tax charge by up to £16,500, and could boost their tax-free cash by £7,500.
In addition, the September inflation rate will be used to upgrade public sector pension entitlements, which use career average earnings and see members 'bank' their accrued pension each year.
This means that teachers' pensions are set to rise by 4.6% next year, by 4.5% for those in the NHS, and 4.25% for the police, despite many also seeing their pay stagnate.
"Public sector workers may actually find their future pensions increasing nicely while they struggle to pay for the here and now," Hargreaves Lansdown, senior pension analyst, Nathan Long, said.
Eyes will now turn to the Bank of England to see if they respond to the latest inflation figures with raising interest rates from their historic low of 0.25%.
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