Basic state pension increased 15% ?? 6 March at 2:27PM in Pensions, annuities & retirement planning 8 replies 864 views

Goldenyears

DWP letters are not expected for another 10 days, but I have had my new 2023/24 coding from HMRC.  The basic pension amount deducted from personal allowance was in previous years accurate to a few pennies.  This time my basic pension amount has increased by almost exactly 15%  not 10%.  Intriguing, but why?  My wife's BSP has also increased by exactly 15%.  We are in our mid seventies.  Our BSP's have a small old SERPS additional element, just £8-10 per week.  I await the breakdown statement in DWP's letter with interest.

molerat

Your tax code is normally based on 1 x old and 51 x new pension weeks, how does that look.

Dazed_and_C0nfused

Sounds very odd.  Is it definitely the State Pension tax code deduction on its own that's increased by 15%?

Goldenyears

Dazed_and_C0nfused said:

Sounds very odd.  Is it definitely the State Pension tax code deduction on its own that's increased by 15%?

It is itemised in the coding notice as "Less State Pension".  In previous years it has always been very close to 52x new weekly amount.  The difference was just pennies, certainly not 1 x old plus 51 x new.

molerat

Goldenyears said:

Dazed_and_C0nfused said:

Sounds very odd.  Is it definitely the State Pension tax code deduction on its own that's increased by 15%?

It is itemised in the coding notice as "Less State Pension".  In previous years it has always been very close to 52x new weekly amount.  The difference was just pennies, certainly not 1 x old plus 51 x new.

There are often 2 different figures, one in your expected income which is usually 52 x new and one for calculating your code which generally uses 1 x old and 51 x new.  With this year's large increase there is going to be a greater disparity between the 2.  I have just done a comparison using the lower from last year and the higher from this and it only comes out at not much over 10%, very strange.

Ganga

My state pension will increase by just over 11% ,good news as i was expecting 10% also its not just the main element of the pension that increases its also grad contributions etc.

Goldenyears

I am now wondering if it's some element of my Civil Service pension increase added to BSP which is causing the excess.  It's normally very small but then  I've never had a CPI increase more than 5% before.  I will find out in a few days.

Silvertabby

Goldenyears said:

I am now wondering if it's some element of my Civil Service pension increase added to BSP which is causing the excess.  It's normally very small but then  I've never had a CPI increase more than 5% before.  I will find out in a few days.

Indeed.  This is going to generate a lot of head scratching and questions on these boards come April/May...

In the case of those with contracted out service between 1978 and 1997, and who reached SPA before April 2016, cost of living increases are applied thus:

Pension (in your case Civil Service)  is the sum of 3 parts.

Pre 1988 GMP = nil increase paid by CS
Post 1988 GMP = 3% (cap) paid by CS
Excess = 10.1% (2023 CPI) paid by CS

The full pre 1988 increase plus the remaining 7.1% from the post 1988 GMP is then paid with your State pension.

As you say, when inflation is low, the difference is negligible.  But this year, with a CPI increase of 10.1%, it will stick out like a sore thumb.

Then we come to the GMP increases for post April 2016 SPA, which is a whole new ball game.....

xylophone

See 
https://forums.moneysavingexpert.com/discussion/comment/61084659/#Comment_61084659

You will note that the poster (who has pre and post 88 GMP) is querying his increase for the year 2013/4.

Let's suppose that inflation in Sept 2012 had been 10.1%.

Then his pre 97 ASP increases to £108.91.

His COD will be £60.65 (pre 88 GMP never changes) + £39.31 ( because post 88 GMP increased by 3% by his occupational scheme).

Deduct £99.96 from £108.91.

His ASP for 13/14 becomes £9.15.

Just to illustrate the difference high inflation makes.