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The National (Scotland)
The National (Scotland)
National
Joshua Searle

How much state pensions are set to rise in April as Government 'face £100m bill'

Pensions are set to rise in April next year as the Government is facing an extra £100 million bill following revised figures published on Tuesday, a former pensions minister has said.

Under the triple lock guarantee, the state pension increases every April in line with whichever is the highest of earnings growth in the year from May to July of the previous year, CPI (Consumer Prices Index) inflation in September of the previous year, or 2.5%.

With inflation running at more subdued levels, it is thought that wages will determine next year’s state pension increase.

Last month, Office for National Statistics (ONS) figures indicated that total pay had increased by 4.0% annually in the three months to July.

But when jobs data was released on Tuesday, the ONS had revised the figure up to 4.1%.

Sir Steve Webb, a former Liberal Democrat pensions minister, said the extra 0.1% could add around £100 million to the state pension bill.

Sir Steve, who is now a partner at consultants LCP (Lane Clark & Peacock) said: “A slightly higher rate of increase is welcome for pensioners, though will be an unwelcome £100 million extra cost for the Chancellor as she prepares her Budget.

“The rate of the new state pension will now be close to £12,000 per year, very near to the £12,570 tax-free personal allowance. This is likely to put extra pressure on the Chancellor to take action on tax allowances in the coming years.”


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The revised wage growth figure means that the new state pension, for people who reached state pension age after April 2016, could rise from £221.20 per week in 2024/25 to £230.30 in 2025/26.

The old basic state pension could increase from £169.50 per week currently to £176.45 next year.

Many pensioners do not receive the full state pension and so they will not see the full cash increases.

The potential pensions boost comes at a time when many pensioners face losing winter fuel payments.

Chancellor Rachel Reeves announced a plan to limit the winter fuel allowance in July, as she said there was a need to fill a £22 billion “black hole” in the public finances.

Only those who claim pension credit and other means-tested benefits will receive it after the change.

It is expected to reduce the number of pensioners in receipt of the up to £300 payment by 10 million, from 11.4 million to 1.5 million.

A drive is currently underway to encourage those who are entitled to receive pension credit to claim.

Up to 760,000 families who were entitled to receive pension credit did not claim it in the financial year ending in 2023, according to recent Department for Work and Pensions (DWP) figures.

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