Autumn Statement 2022: Pensions and benefits to rise 10.1%
Chancellor Jeremy Hunt delivered his much-anticipated Autumn Statement to the Commons, saying “the government is on the side of millions of pensioners” as he confirmed this group will see “the biggest ever cash increase” to their pensions.
He said: “The cost-of-living crisis is harming not just poor pensioners but all pensioners so because we have taken difficult decisions elsewhere in this statement, I can today announce that we will fulfil our pledge to the country to protect the Pensions Triple Lock.
“In April, the state pension will increase in line with inflation, an £870 increase which represents the biggest ever cash increase in the state pension.
“To the millions of pensioners who will benefit from this measure I say – now and always, this government is on your side.”
It comes after speculation rose last month that it could be scrapped to lessen the government’s funding black hole, despite former Prime Minister Liz Truss confirming her commitment to the Triple Lock before her departure.
The Pensions Triple Lock guarantees the basic state pension will rise by the higher of average earnings, inflation or 2.5%. As it will rise by the inflation figure of 10.1%, some will see their pensions breach £10,000 a year for the first time.
‘Something of a milestone’
Tom Selby, AJ Bell head of retirement policy, said: “The full flat-rate state pension, paid to those reaching state pension age from 6 April 2016, will increase from £185.15 per week to £203.85 per week (£10,600.20 per year) from April 2023. This is something of a milestone as it will be the first time the UK state pension has breached the £10,000 a year mark.
“The basic state pension, paid to those who reached state pension age before 6 April 2016, will increase from £141.85 per week to £156.20 per week (£8,122.40 per year).
“This bumper income rise will undoubtedly be welcomed by millions of retirees, although it is still below the latest CPI inflation readout of 11.1%. If those price rises persist, even the triple lock won’t fully protect pensioners’ living standards.”
Selby added: “It’s also worth remembering that not all pensioners will be in receipt of the full state pension. According to the latest official figures, 15% of retirees receive a state pension worth less than £100 a week, with one-in-five women taking home a state pension income below this level.”
Pension Credit increase
Hunt added that in order to support the poorest pensioners, he had “decided to increase Pension Credit by 10.1% which is worth up to £1,470 for a couple and £960 for a single pensioner in our most vulnerable households.”
This relates to the standard minimum income guarantee in Pension Credit “to ensure pensioners on the lowest incomes are protected from inflation and do not lose some of their State Pension increase in the Pension Credit means test.”
Pension Credit is an income-related benefit that tops up a pensioner’s weekly income if it’s below £182.60 for a single person or £278.70 for a couple.
It also acts as a gateway for other benefits, such as help with council tax, NHS prescriptions and glasses as well as the potential for a free TV licence.
However, take-up of the benefit has been low, with estimates suggesting up to 850,000 people failed to claim, missing out on an average £1,900 in 2020.
Sarah Pennells, consumer finance specialist at Royal London, said: “Pension Credit – a top-up benefit for pensioners on the lowest incomes, is one of the most under-claimed benefits. Because it’s a gateway benefit to other help, such as with Council Tax, energy bills and housing costs, it can be worth an average of £3,300 a year.”
Benefits increased in line with inflation
Turning to benefits, Hunt said: “There have been some representations to keep the uplift to working age and disability benefits below the level of inflation given the financial constraints we face.
“But that would not be consistent with our commitment to protect the most vulnerable, so today I also commit to uprate such benefits by inflation with an increase of 10.1%.
“That is an expensive commitment costing £11 billion. But it means 10 million working age families will see a much-needed increase next year.
“On average, a family on Universal Credit will benefit next year by around £600. And to increase the number of households who can benefit from this decision I will also exceptionally increase the benefit cap with inflation next year.”
The cap will be raised from £20,000 to £22,020 for families nationally and from £23,000 to £25,323 in Greater London from April 2023. For single adults, it will be raised from £13,400 to £14,753 nationally and from £15,410 to £16,967 in Greater London.
Further, the Chancellor confirmed that in 2023/24, an additional Cost of Living Payment of £900 will be provided to households on means-tested benefits; £300 will be paid to pensioner households, and £150 to individuals in receipt of disability benefits.
‘Welcomed by millions of households facing a difficult winter’
Richard Lane, director of external affairs at StepChange debt charity, said: “After weeks of uncertainty, confirmation from the Chancellor today that benefits will be uprated in line with inflation, and cost of living support will continue beyond April will be welcomed by millions of households facing a difficult winter.”
However, he added: “While the government’s announcements are welcome, it’s far from clear that the support offered will be enough to prevent rising financial difficulty and hardship this winter.
“Those who receive means-tested benefits are facing the biggest fall in real income and will be exposed to hardship and destitution. The Government can ease pressures on these households by stopping unaffordable deductions from Universal Credit for government debts like historic tax credit overpayments.”