State pension set to rise by 4.1% and benefits by 1.7% from April 2025

Goldfinger

Spare a thought to the millions on Carers Allowance. 3p an hour increase next April.

NedS

FlorayG said:

Well that's nice for me as I'm a pensioner; but UC is way too low in the first place and 1.7% surely is not in keeping with cost of living rise?

So how would you measure the rise in the cost of living, if not by the universally recognised Consumer Price Index?

Many things are actually significantly cheaper than a year ago. I just checked fuel (diesel) prices and they are 16% cheaper now than a year ago.

hugheskevi

michaels said:

hugheskevi said:

It is interesting to note that between 2010-25 State Pension has tracked RPI almost exactly.



If no changes to uprating had been made in 2011, and simple statutory increases were applied each year (RPI uprating with a floor of zero) the rate of State Pension would be higher today than it is, despite the Triple Lock.

Over the longer 2001-25 period State Pension has comfortably outpaced all of RPI, CPI, and earnings. 

What is very striking is the terrible performance of average earnings growth between 2010-25, where it barely kept pace with CPI.

However RPI is not a valid statistical measure as it basically assumes that people do not change behaviour in response to changes in relative prices.  Hence CPI is the more relevant comparator.

Which is not to say that real earning only keeping up with prices is not a very poor result compared to historic periods.  unfortunately with our judging governments by GDP (and not even GDP per head), that is therefore the statistic they concentrate on.

Agree that RPI has statistical issues, but despite its flaws it was used as the uprating metric in the 1980s and 1990s, and as the statutory underpin until April 2011.

I think that gives a fascinating perspective on the history of the state pension and the current economic performance - the common narrative is that the State Pension was price uprated during the 1980s and 1990s and so pensioners fell behind other parts of society. Hence, Triple Lock's eventual need to restore the value of the State Pension.

Yet, if we look at 3 periods:

1980s/90s - Strict RPI uprating
2000s - ad hoc uprating, RPI underpin, 2.5% minimum uplift (political pledge, not statutory)
2011 onwards - Triple Lock

Then I very much doubt that most people would say that the period of the Triple Lock - commonly discussed as being unsustainable and overly generous, was actually the lowest period of uprating in the last 45 years when looked at relative to RPI (it would be interesting to consider these periods relative to CPI, I suspect the outcome would be very similar).

Of course, with the collapse of earnings growth, State Pension has recovered huge amounts of ground relative to earnings and so pensioners are now generally better off than many other parts of society. But that has a lot more to do with the dire performance of the wider economy than it does with pension uprating policy.

APWhiteSavvy

I just wonder if this will still exist by the time I reach the age where I'll be eligible for this.

I'm 33.

michaels

hugheskevi said:

michaels said:

hugheskevi said:

It is interesting to note that between 2010-25 State Pension has tracked RPI almost exactly.



If no changes to uprating had been made in 2011, and simple statutory increases were applied each year (RPI uprating with a floor of zero) the rate of State Pension would be higher today than it is, despite the Triple Lock.

Over the longer 2001-25 period State Pension has comfortably outpaced all of RPI, CPI, and earnings. 

What is very striking is the terrible performance of average earnings growth between 2010-25, where it barely kept pace with CPI.

However RPI is not a valid statistical measure as it basically assumes that people do not change behaviour in response to changes in relative prices.  Hence CPI is the more relevant comparator.

Which is not to say that real earning only keeping up with prices is not a very poor result compared to historic periods.  unfortunately with our judging governments by GDP (and not even GDP per head), that is therefore the statistic they concentrate on.

Agree that RPI has statistical issues, but despite its flaws it was used as the uprating metric in the 1980s and 1990s, and as the statutory underpin until April 2011.

I think that gives a fascinating perspective on the history of the state pension and the current economic performance - the common narrative is that the State Pension was price uprated during the 1980s and 1990s and so pensioners fell behind other parts of society. Hence, Triple Lock's eventual need to restore the value of the State Pension.

Yet, if we look at 3 periods:

1980s/90s - Strict RPI uprating
2000s - ad hoc uprating, RPI underpin, 2.5% minimum uplift (political pledge, not statutory)
2011 onwards - Triple Lock

Then I very much doubt that most people would say that the period of the Triple Lock - commonly discussed as being unsustainable and overly generous, was actually the lowest period of uprating in the last 45 years when looked at relative to RPI (it would be interesting to consider these periods relative to CPI, I suspect the outcome would be very similar).

Of course, with the collapse of earnings growth, State Pension has recovered huge amounts of ground relative to earnings and so pensioners are now generally better off than many other parts of society. But that has a lot more to do with the dire performance of the wider economy than it does with pension uprating policy.

Agree with all of that but given the purpose of the triple lock was to stop pensioners incomes falling behind those of the general population (and protect them in real terms) it has succeeded in its purpose.

Early_Retire_Free

Exodi said:

FlorayG said:

Well that's nice for me as I'm a pensioner; but UC is way too low in the first place and 1.7% surely is not in keeping with cost of living rise?

Unfortunately there's no magic money tree so giving more money to anyone comes at the expense of someone else (though one may opt to revert to the easy default faceless target 'the rich', despite already contributing the  vast majority of tax revenue).

Given the budget is around the corner which looks set to increase employers NI (which has an indirect impact on employees (direct in the case of sal sac), despite Labour pretending it won't) I can't see there will be much appetite among taxpayers to provide bigger increases to welfare, though I'm sure there are people who disagree.

There is not and should not be a magic money tree and neither should there be a relentless pursuit of the wealthy.  However, the very wealthy often have personal tax rates lower than average workers. This is largely because the rates of tax applied to capital earnings (dividends and capittal gains) are lower than those applied to wages.

Similarly, there are many global organisations that avoid UK taxes by charging their UK corporations with Royalties and management fees that somehow find their way to companies in regions which do not levy coproration tax.

To be clear, the wealthy pay a large percentage of the total tax take but they do not pay their fair share and the government are too scared to doing anything about that.  

If you doubt any of this, try reading Taxtopia, its an eye opener.

michaels

Early_Retire_Free said:

Exodi said:

FlorayG said:

Well that's nice for me as I'm a pensioner; but UC is way too low in the first place and 1.7% surely is not in keeping with cost of living rise?

Unfortunately there's no magic money tree so giving more money to anyone comes at the expense of someone else (though one may opt to revert to the easy default faceless target 'the rich', despite already contributing the  vast majority of tax revenue).

Given the budget is around the corner which looks set to increase employers NI (which has an indirect impact on employees (direct in the case of sal sac), despite Labour pretending it won't) I can't see there will be much appetite among taxpayers to provide bigger increases to welfare, though I'm sure there are people who disagree.

There is not and should not be a magic money tree and neither should there be a relentless pursuit of the wealthy.  However, the very wealthy often have personal tax rates lower than average workers. This is largely because the rates of tax applied to capital earnings (dividends and capittal gains) are lower than those applied to wages.

Similarly, there are many global organisations that avoid UK taxes by charging their UK corporations with Royalties and management fees that somehow find their way to companies in regions which do not levy coproration tax.

To be clear, the wealthy pay a large percentage of the total tax take but they do not pay their fair share and the government are too scared to doing anything about that.  

If you doubt any of this, try reading Taxtopia, its an eye opener.

I might also add that the current system of pension tax relief makes the UK tax system much less progressive than the headline income tax rates imply.  Consider earnings between 15k and 25k, you pay 20% tax and 8% NI if you take your money now or 15% tax and 8% NI if you take if later through a pension.  Compare earnings between 50k ad 60k, take them now and 40% tax and 2% NI is paid, take them later through a pension and only 15% tax and 2% NI is paid - so basically a lower effective tax rate on earnings between 50k and 60k than there is on earnings between 15k and 25k - is that really what we want?

JoeCrystal

APWhiteSavvy said:

I just wonder if this will still exist by the time I reach the age where I'll be eligible for this.

I'm 33.

I am 100% sure that the State Pension will exist. However, it is when you can get it and quite possible, how it is calculated will certainly change. Look at how the amounts of NI contributions required to get full state pension changes throughout the decades for example.

eskbanker

Early_Retire_Free said:
However, the very wealthy often have personal tax rates lower than average workers. This is largely because the rates of tax applied to capital earnings (dividends and capittal gains) are lower than those applied to wages.

For now at least, this seems to be another area ripe for review....

Bravepants

la531983 said:

Dazed_and_C0nfused said:

la531983 said:

westv said:

Is 1.7% the rate that will be used for public sector pension increases?

No, the March figures are used for those.

Is that new 🤔

Well I went and checked my own statement and 10.1% was added onto my balance last year, and that was the inflation figure for March 2023. So I only speak as I find.

No, it's the previous September.

https://www.gov.uk/government/publications/public-service-pensions-increase-2024