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State Pension Uprating

Published Friday, February 2, 2018

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

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The State Pension

The State Pension for people who reached State Pension age (SPA) before 6 April 2016 has two main elements. The basic State Pension (bSP), 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 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 2018, the full amount of the bSP will rise from £122.30 to £125.95pw.
  • The statutory requirement is to increase the additional State Pension 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). In April 2016, the additional State Pension was frozen – reflecting the fact that CPI inflation was slightly negative (-0.1%) over the 12 months to September 2015. In April 2017, it will increase by one percent.

A new State Pension (nSP) was introduced from 6 April 2016 for people reaching SPA from that date. Its starting rate was £155.65pw in 2016/17 (SI 2016/227).

The legislation requires the nSP to be uprated at least in line with earnings (Pensions Act 2014, Sch 12 (19)). However, the Government is committed to applying the triple lock, at least until 2020 (HC Deb 23 November 2016 c906). In April 2018, it will rise by 3 per cent to £164.35 pw.

Pension Credit

For people who reached SPA 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 (SMG) in Guarantee Credit to be uprated at least in line with earnings. In the years 2010/11 to 2015/16, it was increased by the cash rise in the bSP (i.e; by more than earnings) to ensure that “the benefits of the triple lock uprating” were passed on to the poorest pensioners (see for example, HM Treasury, Autumn Statement 2014, para 1.235).

Although the increase in 2016/17 and 2017/18 was in line with earnings (as for the basic State Pension), again in April 2018. In the Autumn Budget 2017), the Chancellor announced that the SMG would rise to match the cash increase in the bSP. This means that the single persons’ SMG will rise by £3.65 (from £159.35 to £163.00 per week, a 2.3% rise). For couples the increase is £5.55 (from £243.25 to £248.80).

The other elements of Pension Credit can be uprated by such a percentage as the Secretary of State thinks fit (Social Security Administration Act 1992, s150 (1)).

Savings Credit has been removed for people reaching State Pension age from 6 April 2016. People who reached State Pension age before that date may still be eligible. However, measures have been taken to reduce the amount payable in recent years – often through the combination of reductions in the maximum and increases in the threshold of income taken into account to calculate it (PQ226249 9 March 2015).

The rates of social security benefits – including the State Pension and Pension Credit - for 2018/19 are in the draft Social Security Benefits Uprating Order 2018.

Other relevant Library Briefing Papers include: CBP-07812 State Pension triple lock (February 2017); SN-01457 Frozen overseas pensions (May 2016); SN-07414 The new State Pension – transitional questions (August 2016).

Commons Briefing papers SN05649

Author: Djuna Thurley

Topic: Pensions

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