Pensioners will see the full state pension rise by £5.55 a week from next April, but they will lose out on nearly £500 a year after the triple lock promise was broken.
The triple lock previously meant annual state pension rises are decided by whatever is the highest of price inflation, average earnings growth or 2.5 per cent.
But last month the Government confirmed a one-year suspension of the triple lock formula to exclude the 8.3 per cent rise in average earnings.
Pension problem: The decision to suspend the earnings element of the triple-lock for 2022/23 will cost retirees in receipt of the full flat-rate state pension £9.35 per week
Instead, the state pension will boost pensioner income by 3.1 per cent next April in line with September's Consumer Prices Index inflation figure.
Basic state pension will rise by £4.25, from £137.60 per week to £141.85 per week whilst the flat-rate state pension will rise by £5.55, from £179.60 per week to £185.15 per week.
If the earnings element of the triple-lock had been retained, this would have increased the basic state pension to £149 per week and the flat-rate state pension to £194.50 per week.
The rise is the third highest increase since the triple lock was introduced in its current form more than a decade ago.
Tom Selby, head of retirement policy at AJ Bell, said: 'The good news for retirees is the state pension is set to increase by 3.1 per cent next year.
'However, the Government's decision to suspend the earnings element of the state pension triple-lock means retirees will miss out on a blockbuster 8.3 per cent increase.
'This decision will "cost" someone in receipt of the full flat-rate state pension £9.35 a week in retirement income – or £486.20 over the course of the year.
'The decision to ditch the triple-lock was another reminder that the state pension, while valuable as a retirement income foundation, remains uncertain and subject to the whims of politicians.'
The Treasury is expected to save around £4.7billion thanks to the suspension of the triple lock formula next year.
But many will point to the Conservatives having reneged on their promise to maintain the triple lock in their 2019 election manifesto.
Earlier in the year, This is Money ran a poll asking: should the Government honour the triple lock, if it means a huge rise in the state pension?
A bumper 93 per cent said yes, with more than 22,000 respondents.
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Food and energy represent a bigger proportion of typical household expenditure for those aged 65 and above – 18% of their typical monthly expenditure.
Some experts believe the 3.1 per cent rise fails to account for the fact that pensioners are likely to be hit disproportionally hard by soaring inflation in areas such as heating and food prices.
The next energy price cap, due to come into effect in April next year, could increase by nearly £300, according to some reports, despite the energy price cap having already risen by 12 per cent this month.
Overall inflation is also expected to rise to 4 per cent or more in the coming months meaning pensioners may find themselves worse off in real terms.
Alistair McQueen, head of savings and retirement at Aviva said: '3.1 per cent is a backward looking measure, reflecting the rise in prices from September 2020 to September 2021.
'It underplays recent rises in food prices and it does not reflect October's 12 per cent rise in the energy price cap.
'Food and energy represent a bigger proportion of typical household expenditure for those aged 65 and above – 18 per cent of their typical monthly expenditure - meaning pensioners will be hit harder by these rising prices.'
Kevin Brown, savings specialist at Scottish Friendly added: '3.1 per cent might seem like a healthy increase but against the backdrop of even higher inflation on areas that hit the elderly hard - such as heating bills and food prices - you have the makings of a serious national crisis in the cost of living looming.'
Steven Cameron, pensions director at Aegon, adds: 'While some pensioners will be disappointed that the Government broke its manifesto commitment to keep the triple lock, others will acknowledge the intergenerational challenges of granting an artificially high increase based on a statistical anomaly in the earnings figure due to the pandemic.
'An 8.3 per cent earnings based increase would have represented a windfall bonus for state pensioners, but would have created a £7.5billion annual bill paid for from the National Insurance of today's workers.'