New tax year - state pension and pension creditHow changes from the Budget 2011 will affect you
07 April 2012
With the new tax year starting on 6 April 2012, Which? Money shows you what's changing and how your personal finances will be affected in the 2012/13 tax year. Today, we explain the changes to state pension and pension credit.
State pension and pension credit - what's happening
The full basic state pension will rise by £5.30 on 9 April, to £107.45 per week and there are also changes to the pension credit system.
Pension Credit, designed to make sure pensioners receive a guaranteed minimum income will rise in line with the retail price index (RPI), which currently sits at 3.9%.
However, the Government has reduced the level it pays to those that qualify for its Savings Credit, which ensures that low-income pensioners are rewarded for having generated modest savings for their retirement.
State pension and pension credit - how it will affect you
The Guaranteed Credit increase means that single pensioners will receive a minimum of £142.70 per week, rather than £137.35, from 9 April onwards. For pensioner couples, this figure rises from £209.70 to £217.90.
The bad news for those reliant on Savings Credit is that the Government has cut the maximum rate from £20.52 per week to £18.54, offsetting the state pension increase.
To be able to qualify for Savings Credit you previously needed a minimum income of £103.14 a week but this is rising to £111.80 for a single pensioner.
For a couple, that threshold is rising from £164.55 per week to £178.35, while the maximum payment is falling from £27.09 to £23.73 a week.
You must have at least £10,000 in savings to be eligible for Savings Credit.
State pension and pension credit - changes announced in the Budget 2012
The automatic review of State Pension Age, already due to rise to 65 for women in 2018 and to 66 for men and women in 2020, will be increased in line with increasing life expectancy. Age rises to 67 and 68 are in the pipeline but dates for this are not yet certain.
Age-related allowances for pensioners are to be simplified over time, starting in April 2013, which will eventually create a single personal allowance for all.
There will be a new, single-tier pension for future pensioners to be set around £140 and based on contributions.
State pension and pension credit - how to take action
If you are not reliant on the state pension, you do not have to start drawing income as soon as you become eligible for it.
So if you don't need it to live on, you can postpone the date you start receiving your state pension and earn interest from the government.