Tales Of Woe Increasing - Seven Million Retired People Will Miss Out On £460 State Pension Boost

15th September 2024

The Labour politicians from the chancellor Rachel Reeves downwards keep talking about a £460 uplift for state pension next April BUT that is only those that qualified for the new pension from 2016. The people retired before 2016 are on what is called the old pension so why do they not say that every time they talk about it.

Pensioners are in for shock if they think they will get it but then don't. Combined with cancelling the heating allowance and the price of energy cap increasing in October adding to the strain in all households.

New analysis reveals that approximately seven million older pensioners will not benefit from the full 4 percent uplift in the state pension.

The disparity arises due to differences between the "old" and "new" state pension systems, leaving many pensioners with less income than anticipated.

The "triple lock" mechanism, which ensures that the state pension rises annually by the highest of inflation, wage growth, or 2.5 percent, will see the full “new” state pension increase by £460 to £11,962 per year starting in April 2025. This adjustment is in line with current wage growth of 4 percent, benefiting around three million pensioners who retired after April 2016.

However, the 8.5 million people who retired under the “old” state pension system will experience a smaller increase. Their state pension will rise by 4 percent, resulting in a £354 boost, bringing their annual pension to £9,167. But a significant portion of these retirees, about 7.2 million, also rely on an earnings-related pension, known as Serps, which only increases with inflation.

With inflation currently sitting at 2.2 percent, many older pensioners will receive only about half of the increase in the earnings-related part of their pension, potentially missing out on hundreds of pounds compared to younger retirees.

Politicians need to be much more careful in making comments about the increases. A Department for Work and Pensions spokesperson defended the government's commitment to protecting pensioners, emphasising the role of the triple lock in securing a £1,700 pension increase over the current Parliament. However, they also confirmed that the Serps element of the pension would continue to be linked to inflation rather than the triple lock.

The changes will affect not only pensioners as economically this is a huge withdrawal of funds from many households. It may be the heating allowance mainly affected but effectively it is hundreds of pounds taken from each mainly older and disabled people ability to buy things locally as they still need to buy energy to they their homes.

The heating allowance should probably have been incorporated into the pensions where richer pensioners would pay tax on it and the very poorest who do not pay tax would receive a little extra income.

Martin Lewis the finance expert has suggested the heating allowance be paid only to people in Band A to D houses. No system will be perfect as some living in large houses from a time when the had bigger salaries or inherited a property may not have a big income after retirement.

Some pensioners may already be saving for the winter heating expenses but lets face it the amount pays for energy not just heating despite the name. The money pays for cooking, heating hot water for laundry, electric blankets boiling the kettle, watching tv and anything else that uses electricity. The name heating allowance disguises the truth about the money and how it is essential for so many other things.

It is looking more likely that many other taxes (not income tax, NIC or VAT) will be affected in the budget at then end of October.