Basic state pension increased 15% ??
in Pensions, annuities & retirement planning
8 replies 864 views
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.
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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.....
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.