Britons aged 71 and over may face a reduced income boost next year, as those receiving the ‘basic’ state pension will see a smaller increase compared to their ‘new’ state pension counterparts.
The latest labour market figures indicate the state pension may rise by four percent next April, as this is likely to be the highest figure of the three “triple lock” measures: average earnings growth between May and July, CPI inflation in September, or 2.5 percent.
While this will provide a £460 boost to those eligible to receive the full ‘new’ state pension, the rise will be much smaller for those who only qualify to receive the ‘basic’ state pension.
A four percent rise will raise the ‘basic’ state pension from £169.50 per week (£8,814 per year) to £176.30 per week (£9,168 per year), resulting in an annual increase of £354.
This reflects a sizeable £106 difference to those who receive the new state pension, who will see their payments increase from £221.20 per week (£11,502 per year) to £230.05 per week (£11,963 per year), reflecting a £460 annual increase.
The ‘basic’ state pension applies to men born before April 6, 1951 and women born before April 6, 1953. This makes men receiving the ‘basic’ state pension at least 73 years old, and women at least 71 years old.
The most recent figures show there were approximately 12.7 million pensioners in the UK in May 2023, and around nine million are thought to be aged over 70. This highlights a significant proportion of older adults who may be affected by the disparity in pension increases.
It should be noted that pensioners who qualify for the basic state pension can also qualify for an “additional” state pension, also known as the State Earnings-Related Pension Scheme (SERPS), so they may receive some extra financial support.
However, many of these pensioners may still experience a limited overall income boost due to the smaller increase in the basic state pension.
This concern is underscored by recent Department for Work and Pensions (DWP) research, which reveals that some retired Britons receive only a fraction of the full state pension, with thousands estimated to receive as little as £10 a week.
Becky O’Connor, director of public affairs at PensionBee, commented: “Increases in the state pension are often used to highlight the disparity between pensioner benefits and those for working people.
“However, it’s important to recognise that many pensioners do not receive the full amount and so will not get this headline increase of £460 a year. It’s also vital to bear in mind that many pensioners are completely dependent on the state pension and do not receive any other form of income – and can no longer work.
“Cuts to the winter fuel allowance are likely to affect some of the poorest pensioners, who are on lower amounts of state pension. This group of pensioners need all the support they can get.”
Generally, to get the full state pension people need to have 35 years of National Insurance contributions (NICs). These years can be accumulated through employment, self-employment, or by claiming certain benefits such as Jobseeker’s Allowance, Carer’s Allowance, or Child Benefit.
However, some people may have gaps in their NI records due to various reasons, such as periods of low earnings, unemployment without claiming benefits, or time spent working abroad.
These gaps result in fewer “qualifying” years and subsequently, the person would receive a proportionately smaller state pension.
Those who find they have gaps can make voluntary contributions to increase their weekly state pension amount.
HM Revenue and Customs (HMRC) and the DWP offer an online state pension forecast service for people to calculate if they’ll benefit from making voluntary contributions.
