On Monday, the state pension rose to 8.5%, a very welcome income boost for pensioners who have struggled to keep up with rising prices.
How Much is the State Pension Currently Worth?
Prior to Monday 8th, the state pension was £203.85 a week for the full, new flat-rate state pension, or £156.20 a week for the full, old basic state pension.
New Pension Amounts
£221.20 a week for the full, new flat-rate state pension £169.50 a week for the full, old basic state pension.
Why Are There Different Amounts of Pension?
Anyone who reached state pension age after April 2016 qualified for the ‘new, flat-rate state pension’. Anyone who reached state pension age before April 2016 was on the ‘basic state pension’.
What Determines the Increase in Pension Payments?
The ‘triple lock’ determines the rise in pension payments. It was first introduced by the Conservative and Liberal Democrat coalition government. It was designed to prevent cost of living outstripping pension payments.
How Does the Triple Lock Work?
Every April, the increase is determined by whichever of these three measures is highest… Consumer Prices Index (CPI) from the previous September, the average UK wage growth, or 2.5%.
What is the State Pension?
The state pension is a government-issued income for people who have reached pensionable age and have paid into the system over the course of their working life. If you have paid enough National Insurance in your lifetime, you get the state pension.
How Many People Receive a Pension in the UK?
Right now there are 12 million people in receipt of a state pension. With such a large number, it’s a political issue that can swing votes dramatically. Please the pensioners, and you’ve got a much better chance of election.
Will a Change in Government Risk the Triple Lock?
In short, no. Both the Tories and Labour have made a commitment to keeping the triple lock should they be in power after the next general election.
Pension Age Changes
As life expectancy and demographics have increased, the pensionable ages have changed. Men and women born between 6 October 1954 and 5 April 1960 start receiving their pension at the age of 66.
Pensionable Age Increasing
You’ll have to wait longer to receive your pension if you were born after this date. It’ll be 67 for those born on or after 5 April 1960 and 68 for those born on or after 5 April 1977.
Think Tank Urges Further Delay
They published a report in February saying the UK and other countries with ageing populations will have to increase their state pension age to 71 by 2050, to keep the cost sustainable.
Current UK Pension Costs
The state pension cost the exchequer £110.5bn in 2022-2023. This represents almost half of the total amount that the government spends on benefits.
Cost Increases in Line With Triple Lock and More Reach Pensionable Age
The Office for Budget Responsibility thinks this will grow to £124bn in 2023-2024. This will be because of the increased fees thanks to the triple lock and the number of people reaching pensionable age.
Further Financial Assistance Available to Pensioners
Depending on individual circumstances, some pensioners are able to access additional financial help from the government. This includes winter fuel payments and pension credit.
Increase in Pension Will Feel Even Better As Prices Reduce
There’s expectation that prices for some essentials will start to reduce in the coming months, which will make the 8.5% increase feel even better. Certain foods in particular are likely to reduce in price.
Pensions No Longer a Political Football
In a rare case of cross-party agreement, the government and opposition don’t appear to be exchanging blows when it comes to pensions. It’s one of the few lasting legacies of the Tory leadership that will be seen as a positive.
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The post State Pension Rises By 8.5% This Week – What’s Yours Worth? first appeared on Edge Media.
Featured Image Credit: Shutterstock / Dmytro Zinkevych.