State pension to rise by double inflation in 2023 – yet older pensioners get £2,500 less | Personal Finance | Finance

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From April, 12.5million Britons living on the state pension will get their biggest ever pay rise, worth 10.1 percent in line with September’s inflation figure.

It follows the Government’s decision to restore the state pension triple lock, after suspending it for a year.

The Bank of England reckons inflation will fall to five percent next year. If correct, April’s increase will be double the inflation rate.

That offers some consolation for the horrors of the last 12 months, when the state pension rose 3.1 percent but inflation hit 11.1 percent.

Essentials like food and fuel rose at a far faster rate than that.

Despite this, millions of pensioners will continue to find life hard in 2023.

The state pension does not offer a flat-rate increase for all, measured in pounds and pence. How much people get rests on personal factors such as when they retired, and how many National Insurance contributions they made during their working lifetime.

Some will only get a tiny pension increase as a result. 

Older pensioners who retired before April 6, 2016, on the basic state pension are most likely to suffer.

This was replaced overnight by the new state pension, which rolled the basic state pension, State Second Pension (S2P) and the state earnings-related pension scheme (Serps) entitlement into a single entitlement.

From April, the new state pension increases from £9,627.80 to £10,600.20 a year, for somebody who made the full 35 years of qualifying NI contributions.

The basic state pension starts from a much lower point, as it currently pays at most £7,376.20 a year.

The triple lock inflation increase will lift that to just £8,121.20, giving a staggering £2,479 less income.

Many will find that doubly unfair because the oldest pensions who retired before 2010 had to make 44 years of NI contributions to get the full pension, falling to 39 years for women.

That was cut back to 30 years for the final six years of the old scheme.

The gap between the two state pensions will only widen over time.

While both increase by the same percentage amount each year, the basic state pension has a much lower starting point.

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Next April’s increase is worth up to £972.20 a year to somebody on the full new state pension, but just £745 to someone on the basic state pension.

Older pensioners get £227.20 less in extra pay and will fall behind with each future percentage increase. It’s baked into the two-tier system.

In practice, many who receive the basic state pension will get that topped up by S2P and Serps, and could get more than recent retirees.

Typically, these rise by inflation and will also increase by 10.1 percent in April.

Yet many who retired on the old state pension will get a lot less, mostly women who gave up work to raise a family or care for loved ones.

Older pensioners understandably feel aggrieved as they get less pension. They will fall even further behind with each annual increase.

The new state pension was to make supposed to make the system simpler and fairer.

Millions will disagree.

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