In practice millions of hard-pressed pensioners will get a lot less and Labour chancellor Rachel Reeves is only making their lives harder by snatching the Winter Fuel Payment away. It means 2025 will be a tough year for many, especially with a cold snap looming.
Under the triple lock, the state pension rises each year in line with earnings, inflation or 2.5%, whichever is highest.
Many will be looking forward to their next increase, which comes through in April. It will be based on earnings, which rose at 4.1% during the period.
This will lift the maximum state pension from today’s £11,502 to £11,973 a year. Yet that’s well short of what’s required to fund a comfortable retirement.
A single person needs £14,400 a year to enjoy a minimum living standard in retirement, according to the Pensions and Lifetime Savings Association. A moderate standard requires £31,300.
And not everyone on the full new state pension will get £11,973. Roughly half get less because they haven’t got the full 35 years of national insurance (NI) contributions.
Plus there’s a bigger issue.
Some nine million who retired before April 6, 2016, are paid under a different scheme altogether, known as the old basic state pension.
Many will get thousands of pounds less purely as a result of their age.
It’s a long-running problem that few people write about. So I’m trying to put that right at least.
The basic state pension will also increase by 4.1% from April. It will rise from £8,814 to a maximum of £9,175. That’s £2,798 less than the full new state pension.
It’s a huge difference.
Worse, the difference between the two will have widened by another £110 over the last year. From £2,688 today to £2,798.
And the gap will continue to widen every year. No wonder many older pensioners feel poorly treated.
Both state pensions increase by the same triple lock percentage but the new state pension has a higher starting point so each year’s hike is worth more in cash terms.
Soon the gap will exceed £3,000 a year. And it won’t stop there.
But there’s a complicating factor. Not everybody on the basic state pension ends up with less.
Many earn additional state pension on top, such as state second pension (S2P) or state-earnings related pension scheme (Serps).
Typically, older men do better as they were more likely to work and pay NI, building additional entitlement.
Older women often get a pitifully small pension.
Many are in a desperate plight but their problems are rarely reported, which is why I’ve highlighted this again and again.
The new state pension was designed to help women and has largely succeeded, but it hasn’t helped women on the basic state pension.
The poorest, whether on the new or basic state pension, can plug the shortfall by claiming means-tested top-up Pension Credit.
Yet around a 750,000 who are eligible fail to do so.
In a further blow, they’ll now lose their Winter Fuel Payment, too, thanks to Rachel Reeves. That will cost them a further £200, or £300 if over 80.
Labour isn’t to blame for the gap between the new and basic state pension. That’s down to its original design.
But Reeves can be blamed for making things worse by axing the Winter Fuel Payment. It’s going to be a long hard winter for many of the oldest pensioners. And snow is on the way.
