The Department for Work and Pensions (DWP) last year unveiled new plans to increase state pensions along with inflation. These changes state that retirees will receive 3.1 percent of their payments granted through the DWP.
As the cost of living also rises, people of legal retirement age in the UK may increasingly need to rely on support from the DWP. The new rates mean the basic state pension will rise to £141.85 from £137.60 a week. According to DWP, the full new state pension will rise by £185.15 a week from £179.60, the Express reports.
Recipients of the statutory pension can choose between a weekly or a four-week payment. The upcoming changes to the reference value of the statutory pension will come into force on Monday, April 11, 2022.
READ MORE: The DWP support fund has been doubled to help families amid the cost of living crisis
Last year the government opted to abolish the triple-lock guarantee on state pensions, meaning payments would increase by either 2.5 percent, inflation or median earnings. However, due to the pandemic artificially inflating income figures in the UK, the government decided to temporarily suspend the income limit for a year.
In defense of the decision, the DWP said: “In making this decision, the Government has carefully considered the fairest approach for both retirees and younger taxpayers, many of whom have been hardest hit by the financial impact of the pandemic. Furthermore, last year we introduced primary legislation to increase state pensions by 2.5 percent as incomes fell and price inflation rose by half a percentage point. If we had not taken this measure, statutory pensions would have been frozen.”
Earlier this week, figures from the DWP showed the average pensioner’s earnings after housing costs have risen to £361 a week in 2020/12. This represented a slight increase from the £333 per week reported for pensioners in 2019/2020.
DWP statistics also showed that the average income of retired couples was £511 a week. This compares to almost double that of single pensioners, who had an average income of £246 a week.
Jenny Holt, Managing Director of Customer Savings and Investments at Standard Life, explained why total pensions have increased over the last year and how government pension changes have impacted total pensions.
Mr Holt said: “They stress that retirement income, which includes the state pension, is the basis of many pensioners’ earnings, with payments making up more than half of total gross earnings for single pensioners (56 per cent) and for couple pensioners were 37 percent.
“The decision to suspend the triple lock upgrade for 12 months from April is therefore viewed as a blow by many retirees who are on course to see a 3.1 per cent increase, as opposed to the 8 per cent who they would have experienced if it had been retained.
“However, the Chancellor’s recent announcement that the triple lockdown will be reinstated and applied to the 2023/24 statutory pension increase is positive and will give many pensioners some much-needed reassurance.”
Ian Browne, Pensions Expert at Quilter, added: “These figures show that benefits, including state pensions, are much less relevant to many retirees today than they were 10 years ago. This is because overall retirement incomes have increased, reducing reliance on pensions as a source of income for retirement, particularly for those under 75 years of age.
“After age 75, however, retirement incomes, which include the state pension, accounted for half (50 percent) of total gross income for retirees from that age. In contrast, for retirees who had recently reached state pension age, their retirement income, which includes the state pension, accounted for 37 percent of gross income.”
Find out how to get more HertsLive news straight to your inbox for free HERE.