The state pension will be worth in excess of £10,000 for some people next year, after the Chancellor, Jeremy Hunt, confirmed in today's Autumn Statement that it will rise by a record 10.1% in line with inflation.
There had been considerable speculation before the Autumn Statement about how much the state pension would rise by in April 2023. Giving pensioners an increase in line with wage growth (around 5.5%), rather than inflation (10.1%) would have saved the government an estimated £4-5bn.
However, the triple lock guarantee has been reinstated for 2023-24, upholding the Conservative Party's 2019 manifesto commitment.
- Find out more: what the Autumn Statement means for your money
What is the pensions triple lock?
The state pension triple lock guarantee means that each April payments increase by one of three measures: the rate of inflation (as of the previous September), average earnings growth (as of the previous July) or 2.5%, whichever is higher.
In 2022-23, the triple lock was reduced to a double lock to address an anomaly in wage growth following the pandemic. Had the triple lock remained, pensioners would have been in line for an 8.3% state pension hike. Instead, it increased by 3.1%, in line with the rate of inflation in September 2021.
How much state pension will I get?
Pensioners who are entitled to the full level of single-tier state pension will get £203.85 a week from April 2023, up from £185.15 this year. This change means that pensioners will be £972.40 better off by the end of the 2023-24 tax year, taking their total income to £10,600.20.
Those who reached state pension age before April 2016 and receive the basic state pension will see their weekly payments rise from £141.85 to £156.20. This amounts to a £746.20 pay rise in 2023-24, giving a total annual income of £8,122.40.
How much state pension you get depends on your National Insurance record, so you could get less than the headline rates (or more if you’ve built up substantial additional state pension).
The high increase in the state pension means that those reaching state pension age with a full national insurance record might end up with income above the personal allowance (£12,570), and therefore need to pay income tax on the excess.
The government has confirmed that it will release its review of the state pension age in early 2023.
Working-age benefits and Pension Credit also set to increase by 10.1%
The Chancellor confirmed that working-age benefits would also increase by 10.1%.
Working-age benefits usually go up in line with inflation every April, but there was concern that the government could switch to uprating them in line with average earnings to cut costs.
The Resolution Foundation had argued that a benefit rise in line with inflation was crucial to helping families through the cost of living crisis.
If you’re claiming Universal Credit, you get one standard allowance for your household. The amount you will get in 2023-24 is:
- £292.11 a month for single claimants under 25
- £368.74 a month for single claimants aged 25 or over
- £458.51 a month for joint claimants both under 25
- £578.82 a month for joint claimants with either aged 25 or over.
The Pension Credit standard minimum guarantee for 2023-24 will be £201.05 for a single person and £306.85 for a couple.
Pension tax relief remains unchanged
Pension tax relief means that when you pay into a pension, the money that you would normally have paid goes into your pension pot rather than to the government.
The level of pension tax relief you receive is based on the highest rate of income tax you pay, so basic-rate taxpayers the government contributes 20p in the £1 (40p in the £1 for higher-rate taxpayers).
There had been some speculation that the government could tinker with the pensions tax relief system - perhaps by applying the basic rate (20%) to everyone or introducing a new flat rate - but this has been resisted for now.
undefinedsource https://www.which.co.uk/news/article/autumn-statement-2022-state-pension-to-increase-by-a-record-10.1-aZFUo1S25o7z