Thank you for contacting me about the State Pension.
Every year, the Secretary of State for Work and Pensions is required by law to review whether benefits have kept pace with inflation or average earnings increases.
Over the last two years, the pandemic caused a statistical anomaly in average earnings. As millions of people left furlough and the labour market changed significantly, average wage growth was set to be over eight per cent. It would not have been right to increase pensions by this figure, a statistical anomaly, as it is not what the Triple Lock was ever designed to deal with and would have cost working people an additional £4 to 5 billion in taxes.
On 7 September 2021, it was therefore announced that there would be a move to the Double Lock for one year only, meaning it would rise by the highest of either inflation or 2.5 per cent. It was later confirmed that the State Pension would rise by 3.1 per cent for 2022/23, in line with September's inflation figures.
The decision to revert to the Double Lock ensured that pensioners' spending power was preserved and that they were protected from higher living costs. It also ensured that as the Government makes difficult decisions elsewhere across public spending - including freezing public sector pay - pensioners did not benefit unfairly from a statistical anomaly.
I strongly welcome the Chancellor’s announcement during the Autumn Statement 2022 that the Triple Lock will be reinstated for the year 2023/24. This means that in April, the State Pension will increase by 10.1 per cent, in line with the inflation figures for September 2022. This is the biggest cash increase in the State Pension ever.
Since 2010, the Government has already increased the full yearly amount of the basic State Pension by over £2,300 in cash terms.
The Government has also acted to ensure that pensioner households are adequately supported as the cost of living increases.
Under the Energy Price Guarantee (EPG), the typical household will pay no more than £2,500 on their energy bill until April 2023. Thereafter, the price cap will rise so that the typical household will pay no more than £3,000 until April 2024. The EPG will save the average household a further £500 and mean they will not have to face energy bills of £6,000 this winter.
I strongly welcome the Chancellor’s announcement during the Autumn Statement 2022 that the Government will increase its cost-of-living support package by an additional £12 billion, taking the total from £37 to £49 billion.
This increase means that, in addition to the cost-of-living payments already being made this year, the Government will provide extra one-off payments of £900 for the eight million households on means-tested benefits, including Pension Credit; £300 for pensioners; and £150 for disability benefit recipients. The Chancellor also announced that the Government will provide £1 billion of extra funding by extending the Household Support Fund for another year.
On top of the Energy Price Guarantee and £49 billion cost-of-living support package, pensioners continue to receive other support, including free bus passes, Winter Fuel Payments, tax-free pension contributions worth over £50 billion, and free TV licences for the over-75s in receipt of Pension Credit.
I will continue to work with colleagues in Parliament to protect pensioners
You may also have heard of Pension Credit, which is an income-related benefit aimed at supporting pensioners on low incomes. Pension Credit provides a weekly top-up to your other income up to a standard minimum amount, depending upon how much other weekly income you have. Extra amounts are also payable in respect of disability, caring (including for children) and certain housing costs. There are around 1.5 million people already claiming Pension Credit but I understand that estimates suggest that up to 1 million families who may be entitled did not claim the benefit. As it may be worth thousands of pounds a year to eligible households, I encourage you to use this online tool (https://www.gov.uk/pension-credit-calculator) to see if this is something you may be eligible for. An award of Pension Credit, even a small amount, can also act as a gateway to a range of other pensioner benefits, including help with rent and Council Tax, NHS costs and, for those over 75, a free TV licence.
National Insurance Fund Surplus
It is important that the working balance of the National Insurance Fund (NIF) remains positive, as this ensures there are always enough funds to pay for benefits and allows the Government to deal with short-term fluctuations in spending or receipts. The balance of the NIF is managed as part of the Government’s overall public finances and reduces the need to borrow from elsewhere. Any additional spending from the NIF would represent an increase in overall government spending and, without cuts in other areas of spending or additional taxes, an increase in government borrowing.
On comparisons between UK pensions and those elsewhere in the world, as Full Fact have said themselves, it is not possible to compare the UK state pension with other countries. OECD country rankings tend to just use the state pension itself, whereas in the UK, individual retirement income tends to be tilted more to voluntary private savings compared to other countries. This comparison therefore represents the UK unfavourably. For example, private workplace pensions make up over one third of older people’s earnings in the UK – compared to just 5 per cent in Germany and even less in Spain and France. Corrected for this, the UK is similar to countries like New Zealand or Germany.
I would like to reassure you that I will continue to work with colleagues in Parliament to protect pensioners consistently.
Thank you again for taking the time to contact me.
Craig Whittaker MP