State pension rise still locked
The main state pensions will have risen faster than inflation by April 2021
The main state pensions will have risen faster than inflation by April 2021, but these state benefits are still low compared with even average earnings.
The new state pension (for those who qualify and reached state pension age (SPA) after 5 April 2016) will rise to £179.60 a week in April 2021 and the old (basic) state pension (for those who reached SPA earlier) will be £137.60 a week. Both increases are 2.5%, a rate secured by the so-called ‘Triple Lock’, which requires these pensions to rise by the greater of:
• the increase in average earnings;
• the rise in prices (as measured by the consumer price index (CPI)); and
The new state pension and National Living Wage (NLW) both came into effect in 2016, but 2021 is the first year that the pension is the faster growing of the two.
Compare the positions of Jack, aged 64 and Jill, aged 66. In 2021/22, Jack works a 35-hour week for the National Living Wage of £311.85. Jill, at the new SPA of 66, will receive the new state pension of £179.60 a week – less than 60% of Jack’s earnings.
The UK sits at the bottom of the state pension league table for OECD members. This lowly position explains why the government has placed so much emphasis on automatic enrolment in workplace pensions. Similarly, it demonstrates the need for additional private pension provision regardless of any increase to the state pension.
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The information in this article does not constitute advice and should be used for informational purposes only. This content has been provided to Helm Godfrey by Taxbriefs.