Kwarteng says UK ‘committed’ to helping pensioners
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News that the state pension triple lock will be honoured next April would have come as welcome relief for many, as it promises a more significant payment increase during a time of soaring – and for some, untenable – living costs. However, it’s unclear whether additional elements, such as Pension Credit, will be included in the rise, sparking worry that the UK’s lowest-income retirees won’t be protected.
By honouring the triple lock, it means the highest percentage out of inflation, wage increases, or the figure of 2.5 percent, will be used to decide how much the state pension will increase.
Tom Selby, head of retirement policy at AJ Bell, said: “Both the Chancellor and the Prime Minister have confirmed the state pension triple lock will be honoured, with retirees set for a bumper increase in their incomes in April 2023 as a result.”
However, Mr Selby continued: “With cabinet ministers now openly questioning whether benefits for those in work should be increased in line with inflation, an all-out civil war has broken out over the topic at the Conservative Party conference.”
If the Consumer Price Index (CPI) rate comes in at 10 percent for September, it could see the ‘new’ State Pension rise to £203.65 per week – well over £10,000 a year – while the basic state pension should increase to £156.05 per week.
However, at present, only the ‘new’ state pension and the basic state pension are covered by this metric, while Pension Credit – a top-up paid to the lowest-income pensioners in society – currently only benefits from limited earnings-linked protection.
Mr Selby said: “The state pension has a long and complicated history, however, with various different elements that aren’t protected by the triple-lock guarantee.”
According to Mr Selby, this includes the additional state pension, which is a top-up paid to people based on their earnings if they reached state pension age prior to April 2016, the ‘protected payment’ element of the new state pension, and Pension Credit.
Mr Selby said: “The good news for those in receipt of a state pension ‘protected payment’ or with additional state pension entitlements is the legislation requires the Government to uprate these benefits in line with inflation.
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“Given inflation in September is pretty much nailed-on to be above earnings or 2.5 percent, they should see all their state benefits rise in line with prices.”
However, he continued: “What happens to over 1.4 million people in receipt of Pension Credit – among the poorest retirees in society – is less clear.
“Legislation only requires the Government to uprate the core element of Pension Credit – the ‘standard minimum guarantee’ – in line with average earnings growth.”
In 2022/23, the ‘standard minimum guarantee’ amount is set at £182.60 per week for a single person and £278.70 per week for a couple. Those with incomes below these levels will have it topped up to this amount by Pension Credit.
In view of this, based on average earnings growth in the three months to July, this implies that guarantee credit will rise by 5.5 percent, according to Statista.
Mr Selby said: “Other elements of Pension Credit, including savings credit and extra top-ups for carers and those with severe disabilities, have no increase baked in.”
However, this doesn’t mean there can’t be an increase, but this change would be at the discretion of the Government and if announced, could “ease the worries of millions”, according to Mr Selby.
He said: “For the increase applied this year, for example, temporary legislation created as part of the decision to axe the earnings element of the triple-lock for one year saw all elements of Pension Credit increase by 3.1 percent, in line with the September 2021 CPI inflation figure. This legislation falls away for next year’s increase.
“Given Pension Credit is paid to the UK’s lowest income retirees, it would cause uproar if they did not receive the same protection against inflation as those in receipt of the State Pension.
“The uncertainty around this is undoubtedly causing anxiety to lots of people, particularly on the back of recent energy price rises.
However, Mr Selby continued: “The Government has the power to ease the worries of millions of people by setting out exactly what increases will be applied next year.”
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