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State Pension Uprating

Published Friday, September 2, 2016

Looks at the current policy on uprating the State Pension and Pension Credit

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The State Pension for people reaching State Pension age before 6 April 2016 has different elements. The basic State Pension (based on a person’s National Insurance contribution record) and the additional State Pension (which is partly earnings-related). Different uprating arrangements apply to each:

  • The statutory requirement is to increase the basic State Pension (BSP) at least in line with earnings (Social Security Administration Act 1992, s150A). However, the Government is committed to increasing it according to the “triple lock” – the highest of earnings, prices or 2.5 per cent (HM Treasury, Summer Budget 2015, para 1.139). In April 2016, the BSP will be uprated in line with earnings. i.e; by 2.9% or £3.35 to £119.30 pw.
  • The statutory requirement is to increase the additional State Pension (ASP) at least in line with prices (Social Security Administration Act 1992, s150 (1)). Since 2011, the measure of prices used has been the Consumer Prices Index (CPI). As CPI inflation was measured at -0.1% in September 2015, the additional State Pension (and other CPI-linked benefits) will remain largely unchanged for the year 2016/17.

A new State Pension (nSP)was ntroduced 6 April 2016 for people reaching State Pension age from that date. The starting rate - £155.65pw in 2016/17 – is provided for in the State Pension (Amendment) Regulations 2016 (SI 2016/227).  The legislation requires the nSP to be uprated at least in line with earnings (Pensions Act 2014, Schedule 12 (19)). The Government has committed itself to applying the triple lock (HL Deb 28 April 2016 c227)

For people reaching State Pension age before 6 April 2016, Pension Credit has two elements: the Guarantee Credit, which provides a minimum level of income; and the Savings Credit, which aims to provide an additional amount for people aged 65 and over who have made some provision for their retirement. The legislation requires the Standard Minimum Guarantee in Guarantee Credit to be uprated at least in line with earnings. The other elements of Pension Credit can be uprated by such a percentage as the Secretary of State thinks fit having regard to the national economic situation and any other matters which he considers relevant (Social Security Administration Act 1992, s150 (1) (l) and (2)).

In recent years, the Savings Credit threshold has been increased and the maximum reduced, both of which measures have the effect of reducing the amount payable. In March 2015, the Government said that taking into account other changes such as the increase in the BSP by the triple lock, it was “unlikely that any Pension Credit customer should be worse off, in cash terms, as a result of the uprating decisions made over the last three years” (PQ226249 9 March 2015).As part of the Government’s State Pension reforms, people reaching State Pension age from 6 April 2016 are not eligible for Savings Credit.

The policy development is discussed in more detail in Library Briefing Paper SN-02117 State Pension uprating - background (July 2010). Others of possible interest include:

- CBP-07410 2016 Benefits Uprating (November 2015)

- SN-07414 The new State Pension – transitional questions (January 2016)

- SN-01457 Frozen overseas pensions (January 2016)

 

Commons Briefing papers SN05649

Author: Djuna Thurley

Topic: Pensions

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