Basic and New State Pension payments increased earlier this month by 10.1 per cent for some 12.6million older people across the country, as part of the annual uprating. This means people on the full New State Pension will see payments increase from £185.15 to up to £203.85 each week and those on the Basic State Pension will see weekly payments rise from £141.85 to up to £156.20.
However, Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, warns that scrutiny of the State Pension could intensify and the Triple Lock come under the spotlight as UK Government expenditure on the contributory benefit is forecast to surge in the next five years.
The latest expenditure figures from the Department for Work and Pensions (DWP) show that the State Pension cost the UK Government an estimated £112.5billion to deliver in 2022/23 and is forecast to rise to £139.5bn in 2027/28, in real terms. However, in nominal terms the estimated increase is more - from £109.7bn to £147.2bn.
Ms Morrissey said: “State Pension costs are surging with the UK Government predicting eye-watering increases over the next five years. Around 12.6m people are claiming the state pension with this number expected to surge past 13m in just five years, all thanks to the fact we are living longer. This is great news but undoubtedly puts real pressure on the smaller working population who shoulder the cost.”
The UK Government recently decided to postpone an increase in State Pension age to 68 on the basis of increases in longevity slowing down. Ms Morrissey agrees this is “fair” adding that there is a very real prospect that “many people simply are not able to keep working until their late 60s”.
She said that the real problem remains on how to contain these burgeoning costs. Ms Morrissey continued: “We will likely see the decision revisited after the election [in 2024] and so could see further changes to State Pension age, but the role of the Triple Lock is also likely to come under the spotlight.
“Brought in over a decade ago to make sure pensioners received decent State Pension increases, the Triple Lock has also been criticised in recent years for being inter-generationally unfair. The time has come for a review of the State Pension and the Triple Lock’s role within it to make sure it remains fit for purpose.”
The statistics also suggest that the number of people claiming Pension Credit will decrease over time as more people will qualify for the full New State Pension. By 2027/28 there will be an estimated 1.15 million claimants - there are currently 1.4m.
However, it remains a very under-claimed benefit with the DWP taking action to boost awareness again this year in an ongoing take-up campaign. Pensions Minister Laura Trott MP announced earlier this week that a Pension Credit ‘week of action’ will take place between June 12 - 16, 2023.
Commenting on Pension Credit, Ms Morrissey said: “This is a valuable, yet hugely under-claimed, benefit that boosts the incomes of the poorest pensioners and operates as a gateway to other support such as help with Council Tax and eligibility for the £900 cost of living payment.
“The UK Government has tried to boost awareness of Pension Credit in recent months and the figures show a small boost in estimated take-up from 1.368m people in 2022/2023 to 1.38m the following year.
“This may look small but balanced against the fact we expect to see the number of Pension Credit claimants drop over time as more people retire on the full New State Pension then the uptick could be bigger than first thought. However, it’s likely we still have a long way to go before everyone who qualifies for this important benefit gets it.”
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