State pension rates will increase from Monday 10 April
The state pension will be hiked 10.1 per cent starting next Monday, the biggest increase in its history as many pensioners struggle to meet essential bills in a time of double-digit inflation.
The full flat rate will jump to £203.85 a week or £10,600 a year, after the Government honoured its triple lock state pension pledge aimed at ensuring pensioners receive a decent rise in income every year.
Those who retired on the basic rate before April 2016 will get £156.20 a week or £8,120 a year.
That lower amount is topped up by additional state pension entitlements – S2P and Serps – if accrued during working years.
Under the triple lock, the state pension is meant to increase every year by the highest of price inflation, average earnings growth or 2.5 per cent. Last September’s inflation rate was 10.1 per cent and so was used in the latest calculation.
However, the Government provoked fury this time last year by breaking the pledge and imposing a 3.1 per cent state pension increase, after scrapping the earnings element because wage growth was temporarily distorted by the pandemic.
The headline inflation rate was 10.4 per cent in February, and although it is forecast to fall significantly over the spring and summer it might still be relatively high by the time September comes around again.
The Government will therefore be under pressure to keep the triple lock pledge again next year, especially with an election looming.
What you need to know about the state pension rise
– State pension rates will increase from Monday 10 April, and people will receive the new rate for periods from then onwards in their next regular payment following that date.
– The new rates take effect from the first day of someone’s next full benefit week, so if their pay day is a Wednesday it will be from that date onwards.
– As the state pension is paid in arrears, any previous days and weeks owed in their next payment will still be at the 2022/23 rates.
– This approach is applied each year so everyone receives the same rates of state pension for an equal number of weeks regardless of their pay day.
– The state pension is paid on a day determined by the last two digits of a National Insurance number. As the state pension is also usually paid four weeks in arrears, the week in which a four-week payment cycle begins depends on the last letter of the NI number (A-D).
– For example, for a pensioner paid four weeks in arrears when pay day is a Monday the first full payment at the new rates will be 8 May, covering the period 11 April to 8 May.
Meanwhile pension credit, which sees the income of the poorest pensioners topped up to a minimum weekly level, is also rising 10.1 per cent to £201.05 for single people and £306.85 for couples.
Pensions Minister Laura Trott says: ‘We’re delivering the biggest state pension increase in history and boosting pension credit for those on the lowest incomes. This Government will always be on the side of pensioners and future pensioners.’
What do pension experts say?
The triple lock state pension increase will be wiped out by rising food and energy costs, notes Canada Life technical director Andrew Tully.
Food price inflation has added £837 a year on average to household bills, while rising energy costs have added £1,223 to the average energy bill for a UK household since April 2022, he says.
Elderly and worried about bills?
Charities have staff manning free helplines who can help you claim everything you are entitled to and listen to your concerns.
‘Pensioners will be feeling apprehensive and worried, despite the triple lock increase adding £972 a year to those fortunate enough to receive the full state pension.
‘It’s also worth remembering many pensioners don’t receive the full state pension and those who claimed their state pension before April 2016 under the old system will receive less – around an extra £14 week, or £746 per year.
‘Ensure you or your relative is claiming all of the financial support to which you or they are entitled, for example pension credit.
‘Reach out to the charitable organisations who help to support the older and more vulnerable, and as relatives or neighbours of the elderly, keep an eye out for them and help where you can.’
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, says: ‘The forthcoming rise to state pension will come as a welcome boost to pensioners who have been struggling with steep increases to their cost of living in recent months.
‘The state pension forms the backbone of people’s retirement income and with inflation remaining sticky, the 10.1 per cent boost will come in very handy.
‘However, it’s worth saying that not everyone gets the full amount. Women in particular can have gaps in their National Insurance record that mean they aren’t currently entitled to a full pension.’
Dean Butler, managing director for customers at Standard Life, says that the full rate new state pension will account for 84 per cent of the tax free personal allowance of £12,570 from 6 April.
This means pensioners will need just £1,969.80 of income before they start paying income tax, and he urged those with modest pension savings to manage withdrawals carefully and explore their eligibility for benefits using the Government’s calculator.
‘Given the substantial state pension boost, it’s important to be aware of the implications this has in relation to the personal allowance which isn’t due to increase until April 2028.
‘The personal allowance has remained flat in recent years and will gradually be bringing more and more people into the tax system as result.
‘While 25 per cent of pension savings can be withdrawn tax free, the remainder can be taxed. For those with incomes hovering around the personal allowance, it’s worth ensuring they’re not taking bigger lump sums on which they might pay tax if they can be avoided.
‘If they do have any Isa savings these are not subject to income tax so could be useful source of additional income.’
The tax free personal allowance and the state pension (Source: Standard Life)
Becky O’Connor, director of public affairs at PensionBee, says many people relying on the state pension in retirement have seen daily life become rapidly unaffordable over the last year.
‘Last year, pensioners were denied a rise in line with higher living costs as the government suspended the triple lock, before reinstating it for this year. So this rise is overdue and will come as a huge relief to those struggling to pay the bills on their current pension.’
But she warns questions are likely to be raised over the sustainability of the triple lock guarantee.
‘Inflation is forecast to come down but is still expected to be relatively high in September.
‘So we could see a rise in the state pension next year of around 4 or 5 per cent, based on Office for Budget Responsibility inflation forecasts, still higher than the long run average of between 2.5 per cent and 3 per cent a year.’