State pension to rise by £5.55 a week - but is it enough?
The new State Pension applies to men born on or after 6 April 1951 and women born on or after 6 April 1953
The State Pension is set to rise by 3.1% next April, but an extra £5.55 a week is unlikely to cover soaring living costs.
September’s 3.1% inflation figure, which was unveiled on Wednesday, decided next year’s State Pension increase. Any rise in the State Pension is usually subject to a ‘triple lock’ guarantee, which means that it must increase by either September’s price inflation, average wage growth, or 2.5%, whichever is higher. However, last month this was changed to a ‘double lock’ for a year after wage growth came in at 8.3%. A rise this big was considered unfair given the impact of the pandemic on public finances, so next year’s increase was based on the highest of 2.5% and inflation only.
Ian Browne, pensions expert at wealth management company, Quilter, said: “While this is clearly not as good as if the triple lock was maintained in its original form, it is still the third highest uprating in the decade-long history of the triple lock, and will increase the basic State Pension to £141.85 a week next year, and the new State Pension to £185.15 a week. Removing the earnings element of the triple lock has saved the Chancellor a tidy sum, given the cost has now been reduced by £4.7bn.”
Our table shows the current maximum State Pension rates, and how they are changing from April next year.
Maximum weekly State Pension, now and next year:
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The new State Pension applies to men born on or after 6 April 1951 and women born on or after 6 April 1953, and who reached retirement age on or after 6 April 2016. You’ll get the basic State Pension if you’re a man born before 6 April 1951 or a woman born before 6 April 1953.
You only get the full basic State Pension weekly amount if you have 30 qualifying years of National Insurance Contributions, and the full new State Pension weekly amount if you have 35 qualifying years of National Insurance Contributions.
Becky O’Connor, head of pensions and savings at interactive investor, said: “While those receiving a State Pension can take comfort from it heading up in line with inflation from next April, with energy prices rising by the minute and the cost of food and other consumer goods continuing to increase, older people will not feel out of the woods yet.
“Pensioners are potentially more exposed than most to rising inflation because their income is limited and a higher proportion of their spending goes on essentials, like energy.”
Ways to boost your retirement income
If you’re worried that your State Pension combined with any other retirement income you have isn’t enough for you to make ends meet, look at ways you might be able to boost the amount you have coming in.
Options might include:
1) Renting out a room
Renting out a furnished spare room could bring in up to £7,500 a year tax-free thanks the government’s ‘rent a room’ scheme, so this could be a good option if you have a room sitting empty.
2) Find any lost pensions
If you think you might have lost track of some of your retirement savings, it’s worth doing a bit of investigative work to try and track them down. You can use the Pension Tracing service to help you , but bear in mind that this service can only let you know contact details for pension schemes and not whether you have savings with them. You’ll need to contact the scheme’s administrators directly to find this information.
3) Claim any benefits you might be entitled to
Up to £3.5 billion in benefits goes unclaimed every year, so it’s worth checking whether you’re missing out on any cash you might be entitled to, such as Pension Credit. The charity Turn2us.org.uk has a useful Benefits Calculator which can tell you which benefits you might be eligible to claim.
4) Get help with your heating costs
Energy bills are a big worry for millions of households this winter, especially those on lower incomes. If you were born on or before 26 September 1955, you should be eligible for a ‘Winter Fuel Payment’ of between £100 and £300 to help you cover your heating costs. You should be sent this automatically if you receive the State Pension or another social security payment. If you don’t receive yours, you can fill in an email enquiry form or telephone 0800 731 0160 for help.