State pension age Britons face ‘brutal two-year squeeze’ as inflation forecast to hit 18% | Personal Finance | Finance

US bank Citi is warning consumers that the country’s inflation rate is set to peak at 18 percent early next year. This is nine times the Bank of England’s target and comes amid an unprecedented hike in energy prices. Experts are warning that those on the state pension are at risk of a “brutal two-year squeeze” due to the continuing and growing cost of living crisis.

Steve Webb, a partner at LCP, issued a warning as to what this inflation prediction could mean for pensioners.

Mr Webb explained: “If inflation surges between this autumn and next year, this means that linking pension and benefit increases next year to inflation in September 2022 could leave pensioners and others seriously out of pocket.

“This April pensioners got an increase of just 3.1 percent when inflation was already heading for double figures, and as a result are feeling the squeeze this year.

“The Government needs to learn the lessons of 2022 and link April’s pension and benefit rise to the expected inflation rate – otherwise pensioners and people on benefits will face a brutal two-year squeeze on their living standards.”

READ MORE: State pension set to rise next year but 520,000 people will miss out

Sarah Coles, a senior personal finance analyst at Hargreaves Lansdown, is sounding the alarm that a “winter of woe” is on the horizon as inflation continues to soar.

Ms Coles said: “Inflation at 18.6 percent would push millions of people into dire straits. And because these horrible price hikes are being driven by the essentials people need to stay alive – like food and heat – it’s going to hit those on lower incomes hardest, who’ve got nothing left to give.

“A winter of woe is looming amid these frightening forecasts and there is little help in sight to stop a spiral of debt as ‘Shocktober’ approaches.

“The hikes in the energy price cap are responsible for the lion’s share of the increase. The Bank of England had forecast for inflation to peak at 13 percent in the autumn, but gas prices have been climbing ever since, and Citi says it’s going to get far worse.”

DON’T MISS

The finance expert outlined that people on the full new state pension may end up spending 60 percent of their income on energy bills.

“It’s going to hit those on lower incomes harder,” she added.“Using these calculations, someone in the lowest 10 percent of earners could spend an average of 41 percent of their total income on energy by April – even before they’d put a roof over their head or fed their family.

“Someone living entirely on the full flat rate state pension could spend 60 percent of their income on energy by that point.

“Given that the price of everything else is also soaring, it’s going to be impossible for huge numbers of people to stay on top of their bills. Food prices are also climbing into the stratosphere, with the prices of some staples up well over 25 percent in a year already.”

READ MORE: Britons in higher bracket can do 2 main things to reduce tax payments

MORE TO FOLLOW…