MILLIONS of those receiving state pension are set to get a payment boost next month.
The Government confirmed in its Spring Budget documents today rates will increase by £901 in April as the triple lock remains in place.
The Government has confirmed a state pension rise of 8.5% from April, equalling an extra £901 a yearGetty
Millions of those receiving state pension are set to get a payment boost next month
Chancellor Jeremy Hunt first revealed that state pension payments will be going up will be going up by 8.5% in his Autumn Statement.
The amount pensioners get from the state rises every year to keep up with the cost of things like food and household bills.
The triple lock system sees the state pension rise in line with whatever is highest out of: wages for May to July, 2.5% or September’s inflation figures.
Growth in employees’ average total pay was 8.5% in the three months to July last year, while the UK’s rate of inflation remained at 6.7% in September.
It means pensioners on the new state pension will be looking at a boost of as much as £901 a year.
This is up from just over £10,600 to £11,501 a year. And a weekly rise from £203.85 to £221.20 – a £17.35 increase.
It’s important to note though that this is for those entitled to a “full” new state pension.
How much individuals get is based on the number of qualifying years they’ve accrued.
Older pensioners who retired before April 2016 will get a weekly rise from £156.20 to £169.48, and an annual rise from £8,122.40 to £8,812.96.
Other elements of the old state pension system, mainly “additional” state pensions such as SERPS, will rise in line with the increase in CPI inflation for September 2023 which was 6.7%.
Not only that but Pension Credit standard minimum will also rise in line with last July’s wages data at 8.5%.
These new payments will come into effect at the beginning of the new financial year in April.
The news today will come as a welcome relief for millions of pensioners.
There had been concerns last autumn that Mr Hunt would opt to increase pension payments by the lower figure of 7.8% instead.
This is because the overall 8.5% figure includes one-off payments made to civil servants and NHS staff this summer to help settle pay disputes.
A 6.7% rise would be using the July wage figure that did not include bonuses and one-off payments.
It would have seen a lower increase in pension payments of around £826 a year.
Last April, pensions rose by 10.1% in line with the September 2022 inflation rate.
Back in April 2022, state pension payments went up by 2.5%.
Ministers have previously refused to guarantee the triple lock’s continuation beyond the election as inflation and earnings have spiralled.
Work and Pensions Secretary Mel Stride warned it was “not sustainable” in the long term.
But Rishi Sunak had said that he would not touch the triple lock, despite the concerns about cost.
How does the state pension work?
AT the moment the current state pension is paid to both men and women from age 66 – but it’s due to rise to 67 by 2028 and 68 by 2046.
The state pension is a recurring payment from the government most Brits start getting when they reach State Pension age.
But not everyone gets the same amount, and you are awarded depending on your National Insurance record.
For most pensioners, it forms only part of their retirement income, as they could have other pots from a workplace pension, earning and savings.
The new state pension is based on people’s National Insurance records.
Workers must have 35 qualifying years of National Insurance to get the maximum amount of the new state pension.
You earn National Insurance qualifying years through work, or by getting credits, for instance when you are looking after children and claiming child benefit.
If you have gaps, you can top up your record by paying in voluntary National Insurance contributions.
To get the old, full basic state pension, you will need 30 years of contributions or credits.
You will need at least 10 years on your NI record to get any state pension.
How much state pension will I get?
The amount of new state pension you receive depends on your National Insurance (NI) record throughout your adult life.
If you have made at least 35 years of qualifying NI contributions, you may qualify for the maximum amount, outlined above.
The same is true if you have received equivalent credits on your NI record for raising children or providing care.
If you don’t have 35 years, you may be able to top up your record by paying in voluntary NI contributions.
To get the full basic state pension you will need 30 years of NI contributions or credits.
To get any state pension at all, you will need at least 10 years on your NI record.
What age do I get the state pension?
In response to rising life expectancy, the age at which you become eligible to receive the state pension has been going up.
The age is now 66 for both men and women and is set to reach 68 by 2039.
What are the different types of pensions?
WE round-up the main types of pension and how they differ:
Personal pension or self-invested personal pension (SIPP) – This is probably the most flexible type of pension as you can choose your own provider and how much you invest.
Workplace pension – The Government has made it compulsory for employers to automatically enrol you in your workplace pension, unless you opt out.
These so-called defined contribution (DC) pensions are usually chosen by your employer and you won’t be able to change it. Minimum contributions are 8%, with employees paying in 5% (1% in tax relief) and employers contributing 3%.
Final salary pension – This is a also a workplace pension but here, what you get in retirement is decided based on your salary, and you’ll be paid a set amount each year on retiring. It’s often referred to as a gold-plated pension or a defined benefit (DB) pension. But they’re not typically offered by employers anymore.
New state pension – This is what the state pays to those who reach state pension age after April 6 2016. The maximum payout is £203.85 a week and you’ll need 35 years of National Insurance contributions to get this. You also need at least ten years’ worth to qualify for anything at all.
Basic state pension – If you reached the state pension age on or before April 2016, you’ll get the basic state pension. The full amount is £156.20 per week and you’ll need 30 years of National Insurance contributions to get this. If you have the basic state pension you may also get a top-up from what’s known as the additional or second state pension. Those who have built up National Insurance contributions under both the basic and new state pensions will get a combination of both schemes.
How do I claim the state pension?
You won’t automatically get the state pension – you need to claim it once you’re eligible.
You should receive a letter no later than two months before you reach state pension age, explaining what to do.
You can find out more here.
You can choose to defer getting the state pension – you don’t have to take it as soon as you are eligible when you reach state pension age.
Leaving your state pension untouched can boost the amount you eventually get.
If you opt to defer your state pension, your entitlement increases by the equivalent of 1% for every five weeks you do so.
As the state system can be tricky to navigate, a key part of any pension planning involves requesting a state pension forecast.
This will help you get your head around how much you could be eligible to receive, and from what age.
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