In April 2011, basic state pension is to rise in line with the retail prices index (RPI), rather than the consumer prices index (CPI). This gives a 4.6% increase, rather than 3.1%. The lower rate will be used for other state benefits for 2011.
Triple guarantee restores pension earnings link
The government’s preferred measure of inflation is CPI, which will be used to set state pensions from 2012 onwards. Annual increases in average earnings will also be taken into account, as the Minister for Pensions, Steve Webb explained: ‘We’ve taken a decision to restore the link with earnings and increase the basic State Pension by the highest of prices, earnings or 2.5%. This triple guarantee will ensure that pensioners can expect a decent offering from the state in retirement’
Additional state pension follows CPI
State Second Pension (S2P) and pension accrued under the State Earnings Related Pension Scheme (SERPS) will also be increased in April, but in line with CPI rather than RPI. It is paid to those who earned above a certain level were not ‘contracted out’ during their working lives.
For more information on these benefits, read the Which? Planning your retirement advice guide.
Pension credit, which tops up basic state pension for those with no other source of retirement income, is to rise in line with CPI as well. The standard minimum guaranteed weekly income for a single person will rise to £137.35, and to £209.70 for a couple.
Benefits also increased
The following benefits will also rise in line with CPI, from April 2011: Carer’s Allowance, Council Tax Benefit, Disability Living Allowance, Housing Benefit, Incapacity Benefit, Income Support, Jobseeker’s Allowance and Maternity Allowance. Statutory adoption pay, maternity pay, paternity pay and sick pay rates will also increase.
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