State Pension Increase

December 8th, 2014

Following the recent good news regarding the increase in income for those of you currently receving your state pension, the Financial Times has given an interesting summary in a recent article.

“Millions of pensioners are to receive an above-inflation rise in their state pension payments next year, the government confirmed on Thursday.

Under changes that come into effect from April 6, pensioners receiving the basic state pension will see their weekly payments rise

The government said the increase was due to its “triple-lock” policy which sees the state pension uprated each year by whichever is highest out of prices, the rise in average earnings, or 2.5 per cent.

“Thanks to the triple-lock, in this parliament the basic state pension will be £560 per year more than if it had been just uprated by earnings,” said Steve Webb, the pensions minister.

“With inflation remaining low by historic standards and the rise in average earnings at around 0.6 per cent, under previous arrangements the basic state pension may only have gone up by around 70p per week this year.”

In addition, the cash increase in the basic state pension is to be passed to 900,000 poorer pensioners whose income is topped up to a minimum level set by the government.

Under the changes, the new standard minimum guarantee for pension credit will rise to £151.20 for single people from April up from the current minimum of £148.35.

From 2016, the state pension will be replaced by a new single-tier pension, based on qualifying years of contributions, replacing the current system of the basic state pension and its various earnings-related top-ups. It is only available to those who reach state pension age

The government said on Thursday that the illustrative start rate of the new pension would be £151.25 from April 2016, but the amount would be finalised in autumn 2015.

The Pensions Policy Institute has estimated that only 13 per cent of those reaching state pension age in 2016 will qualify for the full single-tier pension, with 61 per cent receiving less.

Under the new system, individuals will need 35 qualifying years of contributions or credits to be eligible for the full single-tier, up from the current 30 years.

People who are within five years of reaching state pension age can obtain a forecast of what they will receive from the new single-tier pension at gov.uk/state-pension-statement.”

To find out more please click here to see the full article.