State Pension to Increase with inflation

Former_MSE_James_F

More than 10 million pensioners could see their state pension rise by £5.55/wk from April 2022 after the Office for National Statistics (ONS) confirmed that inflation stood at 3.1% in the year to September - a figure that is typically used to calculate the following year's state pension increase.

Read the full story here:
'State pension to increase by 3.1% next April giving some retirees an extra £5.55/wk'

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Daliah

Are you sure that more than 10m out of the approx 12m pensioners are in receipt of the full new state pension and thus will get £5.55 a week more?

The Pension Policy Institute suggests that some £26bn will be spent in 2022/23 on new SP, with £61bn on the old basic SP and £17bn on SERPS/S2P (which can only go to people on the old basic SP). Thus it is a lot more likely that most existing pensioners will see no more than an extra £4.25 a week, and many won't even get that much because not everyone on the old scheme does get the full basic amount. The average basic weekly SP amount is £116.56 for men, and £103.37 for women. However, some on the old scheme can get up to £313.66 a week (max basic SP plus max SERPS/S2P), so a 3.1% increase for them is up to £9.72 a week. Not all of those on the new SP actually do get the full new SP as very large numbers will have contracted-out deductions.

Bottom line is, I would say, that it is simply impossible, without the detailed information on who gets how much SP, to guess the weekly improvement by number of people. Safe to say, though, that most pensioners won't see as much as £5.55 a week.

badmemory

I don't believe the ONS figures.  Energy up by 40%, petrol by over 30p a litre since new year, milk by over 5%, not that I expect farmers will see any of it.  Fortunately "I'm alright Jack" but there will be an awful lot of pensioners who won't be.  I suppose it CPI is 10% next September they will make it a single lock.  The only ones getting levelled up are their millionaire friends.

jamesd

It's utterly impossible for more than 1.39 million people (plus some new from Feb 2021) to see a £5.55 rise. This is because there are only 1.39 million people receiving a new state pension with no protected amount. Their mean weekly payment is £152.49 and most are getting less than its maximum and also won't see a £5.55 rise.

It's fairly crude but a more accurate subhead would be along the lines of "Several hundred hundred thousand of the 12 million state pensioners will see a £5.55 increase and the rest will see something else". DWP will have stats on how many are on the maximum single tier pension with no protected payment and getting exactly £5.55 increases. It could be as high as six or seven hundred thousand.

Might be more useful to put the basic state pension plus earnings-related state pension numbers first because they are relevant for 7 times as many people, including everyone who reached their state pension age before April 2016. Saying what happens to the earnings-related part would also be good.

If like most you receive the basic state pension and earnings-related state pension, the earnings-related part will increase by CPI as usual. Same for inherited under the old system and deferred state pension increases.

Per DWP statistics, at present

10,475,904 people receive the old state pension
1,878,662 people receive the new state pension (both tab 2, as of Feb 2021 latest)

Of those who receive the new state pension:

1,386,997 have no protected higher payment
491,671 have a protected higher payment because their old rules calculation was higher than new in April 2016 (tab 3)

Mean weekly state pension for all types is £155.08, £143.70 for women and £168.58 for men. (tab 10)
Mean weekly new state pension is £164.23, £160.11 for women and £166.34 for men (tab 11)
Mean weakly old state pension is £153.44, £141.98 for women, £169.21 for men (tab 11)
Mean weekly new state pension with no protected amount is £152.49, £154.00 for women and £151.53 for men.(tab 12)

It is good to see that the heading says accurately that "State pension to increase by 3.1% next April giving some retirees an extra £5.55/wk" but it'd be nice if the subhead didn't get the number at least seven times too high.

ukdw

On a positive note, putting the £5.55 rise in annual terms, (and using 52.14, rather than 52 as used in the article)  the full new state pension rising from about £9,365 to £9,654.  

Only another about 3.6% to go before the new state pension hits £10k, or £20k for a couple.

badmemory

Doesn't sound quite so good though when you quote the increase for the bulk of pensioners who receive only basic state pension using your 52.14 weeks per year from £7174 to £7396.  Only over 35% to reach £10k then.

ukdw

badmemory said:

Doesn't sound quite so good though when you quote the increase for the bulk of pensioners who receive only basic state pension using your 52.14 weeks per year from £7174 to £7396.  Only over 35% to reach £10k then.

True -  I guess I was thinking more about future state pensioners (like me) than existing ones. I tend to use £10k for SP in my plans - so just glad that it is getting closer.