5% Inflation boost to Pensioners

MSE_Martin

What is this all about?

The State pension increases with the RPI rate of inflation (unless it's less than 2.5% when it increases by 2.5%). Yet more specifically it increases every April, based on the rate for the previous September. This September's rate was today announced to be 5%.

That means the basic state pension will increase from £90.70 to £95.24 for a single person and £145.05 to £152.30 for a couple.

Increases for other benefits, including Pension Credit, are not calculated in exactly the same way but are expected to be annoucned in the next few months. All details will be in the Weekly Email.

Don't forget Pension Credit

This is a massively unclaimed benefit which can add huge amounts to pensioners on lower incomes. If you're not getting it and may be eligible it's important to check. The Benefits Checkup guide can show you how in about five minutes.

This rise may prove a boon

As the rise is based on just one month, the perfect scenario for pensioners is September is a anomolously high rate, and then it drops afterwards, so that the rate rise is artificially higher than the average rise over the year. And it's possible just that will happen this year.

Of course that won't help the fact that the real rate of inflation for most pensioners is much higher than 5%, as those with less disposible income feel the current inflation more harshly, but it should help a little.

Rather bizarrely, a similar system is in place for Student Loans, where interest is linked to April's RPI, coming in to place the folllowing September. In that case the aim is for April to be a low inflation month, and this year it was at 3.8%.

Martin

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thsths

My contract also depends on the RPI, so am I glad to hear to good news. However, as far as I know it is not true that the value depends on the September only. It actually covers October last year to September this year, and it just happens to include quite a number of high inflation months. These months affect the inflation measurement in April just the same, expect that their are spread over two years, so you do not see one really high figure, but two medium high ones.

Murielson

I normally look at this as it affects my military pension and I believe the original statement is correct ie, the RPI for Sep 08 will be used for increases in Apr 09. See below as an example:

http://62.164.176.164/5250.htm

<H2>Pensions increase 2008

Public service pensions which have been in payment for a year will be increased by 3.9 % from 7 April 2008 (ie based on the RPI in September 2007). Any pension which has been in payment for less than a year will be increased by a proportionate amount depending upon the number of months it has been in payment.
</H2>

CLAPTON

Indeed so
state pensions, most state benefits, and Governement / local governement related occupational pensions plus many ex nationalised industries etc increase pensions in april based on the RPI of the previous September.

Miserlymale

The vagaries of the inflation rate versus the government sanctioned pay rises are the very reason that I chose to take early retirement! C.S. and Military Pensions are linked to the rate of inflation, final pensions are linked to the pay at the date of eventual retirement. Given that it was likely that the pay rises would be limited by the governments inflation targets, but pensions were fixed by a rule, it was a no brainer! A sound call?

Andy_L

Possibly, if your still a member you get an extra years service as well as any payrise, the typical 1/60ths would be worth ~1.6% Depending on which bit of the public sector you're in & your position on the pay spine the headline payrise may be in addition to career progression increases so those 3 together would probably beat rpi. In addition depending on what deal you got retiring early may have cost you pension