In 1990, as a result of a social pact, the COLA mechanism was introduced.
This works by awarding an increase calculated on how much the cost of expenses of the average family in the country has increased in percentage terms.
But the expenses of an average family are different from those of a family with low income or that of pensioners.
For example low-income families, on average spend 30% of their expenditure basket on food, while an average family requires an expenditure of 20%.
This means that for a low-income family, a change in the price of food is more important than it is for an average family.
The same applies to pensioners. Pensioners spend relatively more on medicines and food than an average family.
Taking into consideration such circumstances, whilst the COLA mechanism remains in force, the Government has introduced an additional mechanism as a Cost of Living Benefit.