An investigation by the Daily Telegraph found that “triple lock”, which was designed to keep pensions rising, has not kept pace with inflation because it uses lower measure than standard.
The move will increase the full basic pension pay out to £113.10 a week from this April, but had it never been implemented, pensions would have been £114.20 each week.
This difference equates to £57.20 a year and undermines the Conservative Party’s claim to keep pensions increasing up to 2020 if re-elected next year.
Previously, the state pension was linked to a measure of inflation called the retail prices index (RPI).
In 2009, when inflation fell to low levels, it meant that pensions barely increased, with some elderly people seeing their payout rising by just 75p.
Triple lock was hailed as a solution to this issue as it guaranteed an annual increase of at least 2.5 per cent when it was implemented by the coalition in 2010.
However, the method uses the consumer prices index (CPI), which typically rises much slower than RPI and has been widely outgrown in recent years.
The coalition has also recently come under fire from the Labour Party for the way it has implemented a costs cap on residential care costs.
A cap of £72,000 is due come into force during 2016, but Labour’s research found that in reality, the real cost of care will likely to be double that figure as the cap does not take into account the cost of extras such as accommodation fees.
Labour has accused the government of attempting to con the public as the majority of people going into homes will die before their costs get anywhere near the cap.
Currently, the average time a person spends in care is around two years, but it is likely to take five years before the cap is reached.