The UK's key inflation rate hit 3% in September, the highest it's been since March 2012. As a result, there'll be a rise in the basic state pension of almost £5/week next April – and it will mean a number of other changes too.
The Consumer Prices Index (CPI) 12-month rate rose to 3% in September, up from 2.9% in August.
The rise could increase the chance of the Bank of England next month raising the base rate – the official borrowing rate that influences the interest borrowers pay and savers earn. A higher base rate could help keep inflation down – and Bank of England governor Mark Carney has already hinted a rise could be on the cards.
Here's a summary of the other effects this month's inflation rate will have on pensioners, public sector workers and others.
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State pension set to rise by almost £5/week
The latest inflation figures are important because state pension payments from April 2018 will rise in line with September's CPI.
Pensions are protected by a so-called 'triple lock', which means they are raised in line with the highest of average earnings, CPI or 2.5%.
This means pensioners can expect a 3% increase in the basic state pension next April, from £159.55 to just over £164.30 a week.
Pension savers can save more without paying tax
The 'lifetime allowance' – the total amount you can save in your pension over your lifetime without paying tax – is set to increase in April next year in line with September's CPI figure of 3%.
Currently the lifetime allowance is £1 million – you'll have to pay 55% tax on anything you pay into your pension pot over that limit. But from April you'll be allowed to save an extra £30,000 without paying tax.
Public sector pensions will rise
The CPI inflation rate, combined with a job-specific rate, is used to upgrade public sector pension entitlements – ie, the amount that's put into your pension pot each year.
Teachers' pensions are now set to increase by 4.6% next year, while there's set to be a 4.5% rise for NHS workers and 4.25% for the police.
Most benefits won't change – but that may feel like a cut
Almost all working-age benefits – including jobseeker's allowance – are frozen until 2020. So in practice they won't be affected by today's news.
Some though, such as personal independence payments (PIP) and statutory maternity pay, will rise with September's CPI, so will be increased by 3% from next April.
Statutory maternity pay is expected to rise from £140.98 to about £145.20. The amount PIP recipients are given depends on their circumstances, but those on the highest weekly payout of £141.10 should be due £145.30.
Experts have warned that those on benefits which are frozen will effectively see a drop in real terms.
Tom Waters, a research economist at the Institute for Fiscal Studies, said: "This morning's inflation figure, taken together with the latest inflation forecasts, means that the four-year freeze on most working-age benefits is now expected to cut the benefits of 10 million families by £450 a year in real terms – up from £320 back when the freeze was first announced."
If you're a business owner, your rates will increase
The Retail Prices Index (RPI) rose by 3.9% in September – which means UK businesses will face a 3.9% rise in their business rates next year.
Business rates are charged on most non-domestic properties, such as shops and pubs.
The British Retail Consortium says this rise will hit retailers alone with an extra £270 million in tax next April.