Rishi Sunak’s move in spending review could result in pension holders receiving thousands of pounds less in income

The government will stop using the retail prices index measure of inflation in 2030, the chancellor has announced, in a move that will spell bad news for investors and retirees with payouts linked to it.

The RPI has not been used as an official national statistic since 2013 but it is still the figure used for returns on index-linked gilts issued by the UK government. It is also used when calculating annual increases in rail fares and student loan interest.

However, the rate has been discredited as a measure of price rises as it frequently overstates them. Instead, after a consultation that started in March, the government said it would switch to a measure in line with the current consumer prices index plus housing costs (CPIH). This stands 0.4 percentage points lower than RPI, but the gap is often wider.

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The state pension age has risen to 66 and is set to increase up to 68, depending on the year you were born.

The qualifying age at which people in the UK can start to receive the state pension has been steadily increasing in recent years.

As recently as a decade ago, women could claim their state pension when they turned 60, and men could do so at 65.

Now, however, recent changes have brought the qualifying age for both sexes in line with one another.

As the state pension age officially increases, here’s everything you need to know about what’s changed.

What is the state pension?

The state pension is as a regular payment from the government that most UK citizens can claim when they reach State Pension age.

However, not everyone receives the same amount. How much you do receive depends on your National Insurance record.

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Savers are nursing losses approaching 10% in their pension schemes since the start of the coronavirus market panic, while holders of share Isas have lost as much as a quarter of all their money in some funds.

The stock market rout means someone who had accumulated £250,000 in their pension scheme at the start of this year will have seen it shrivel to about £225,000 on Monday.

Holders of final salary-style pensions, mostly in the public sector, lose nothing as their payouts are guaranteed. However, further falls in the market will mean these schemes will drop further into deficit, requiring employers (such as local authorities and universities ) to somehow find the cash to top them up.

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SAVERS could be set for a cash-strapped retirement as a large chunk of Britons have no idea or are dramatically underestimating the size of pension pot needed for their golden years. The UK’s future pensioners are way out in their estimates for retiring, with one in five adults (21 percent) predicting they only need up to £50,000 for their pension pot – £210,000 less than the minimum recommended amount.

This is according to the research from Finder.com, which says the recommended pension pot is sat at £260,000 to £445,000, depending on accommodation costs in retirement and based on the current state pension of just £8,767.20 per year.

Britons on average believe just £100,000 is enough for them to live comfortably in old age, according to the research, while the younger generation are the least prepared for retirement.

Millennials are expected to have the highest cost of living in retirement than any previous generations due to the house price epidemic.

They are more likely to still be paying for a mortgage in later life or forking out on rental accommodation.

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Many people are making a poor financial decision by taking some of their pension pot in cash, a regulator says.

Some pensioners could receive 37% more retirement income every year by investing rather than cashing in, the Financial Conduct Authority (FCA) said.

Workers should be given more guidance about what to do with their pension, and could be sent “wake up” information packs from the age of 50.

Savers can cash in their pension from the age of 55.

The reforms were introduced by the chancellor at the time, George Osborne, in April 2015. By September 2017, some 1.5 million pension pots had been accessed.

Previously, people would have bought an annuity – a financial product that provides a guaranteed retirement income – with their pension pot, although this is an option that remains open to them.

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