Next month, more than 13million retirees will get their annual state pension increase, with most getting 4.1% more under the triple lock.
But as I explained on Sunday, not everyone gets the full uplift.
Those receiving the basic state pension – paid to those who retired before April 6, 2016 – may find parts of their income rising by just 1.7%.
Additional state pension elements, most notably the state earnings-related pension scheme (SERPS) and second state pension (S2P), aren’t protected by the triple lock. They only rise by inflation.
That will come as a shock to many. But here’s an even bigger one.
Most people think the state pension is theirs by right. After decades of National Insurance (NI) contributions, that seems fair.
But it’s not true.
The state pension isn’t an entitlement. It’s a benefit – just like Universal Credit, Housing Benefit, Jobseeker’s Allowance and all the others.
Doesn’t seem right, does it?
I don’t think so. But I don’t make the rules.
The state pension is not guaranteed. Despite paying into the system for years, we’re not building up a personal pot of money.
Today’s state pension is funded by taxpayers. What we get depends on what the government of the day deems it can afford.
Had the system been set up differently, our pension would be a true entitlement, linked solely to our NI contributions.
But it wasn’t – and that makes a world of difference.
In 2016, the Department for Work and Pensions (DWP) confirmed that the state pension is legally defined as a benefit. That wasn’t an accident. The DWP is anxious to “root it within the existing social security framework”.
The definition slapped down a petition entitled: “Stop UK Government and Departments from labelling ‘State Pension’ as benefits!”
The petition went nowhere. It was never going to.
That DWP ruling was issued by a Conservative government. But it hands PM Keir Starmer the perfect excuse to shake things up and save some cash.
Labour doesn’t have to honour the triple lock. No government does. It’s only in place because scrapping it would be politically explosive.
Means testing is another threat.
Last year, Sir Edward Troup, an adviser to Rachel Reeves, suggested wealthy pensioners should be forced to “give up” their full state pension.
Starmer and Reeves are free to act on that advice. The state pension is a benefit – and UK benefits can be means tested.
The state pension age isn’t set in stone either. In fact, it’s a moveable feast. Just ask Waspi women.
It was hiked to 66 for both men and women from 2020, and it won’t stop there.
It will rise from 66 to 67 between 2026 and 2028, and to 68 between 2044 and 2046.
Labour might bring forward the second increase. It depends on factors such as life expectancy and the state of the government’s finances.
As government finances tighten, the state pension is under pressure from every angle.
With income tax thresholds frozen, the new state pension will be taxed within a year or two. Half a million already pay income tax on their additional state pension.
The state pension could be means tested, the triple lock axed or state pension age hiked to 70. Any of these things could happen. Or all of them.
If the state pension were a true entitlement, politicians couldn’t touch it. But it’s a benefit – and that means they can.
No wonder the DWP likes it that way – and no wonder so many people are worried.
