State pension rises 10.1% starting from Monday 10 April: What you need to know

The state pension will be increased by 10.1 percent starting next Monday, the biggest increase in its history, as many retirees struggle to pay essential bills in a time of double-digit inflation.

The full flat rate will rise to £203.85 a week or £10,600 a year, after the government honors its triple lock state pension commitment to ensure pensioners get a decent increase in income each year.

Those who retired at the base rate before April 2016 will be paid £156.20 per week or £8,120 per year.

That lower amount is supplemented with additional AOW entitlements – S2P and Serps – if accrued during working years.

Under the triple lock, the AOW must rise every year with the highest price inflation, average income growth or 2.5 percent. The inflation of last September was 10.1 percent and was therefore used in the last calculation.

However, the government provoked anger around this time last year by breaking the promise and imposing a 3.1 percent state pension increase, after scrapping the income element as wage growth was temporarily disrupted by the pandemic.

Headline inflation was 10.4 percent in February, and while it is predicted to fall significantly in the spring and summer, it could still be relatively high by the time September arrives.

The government will therefore be under pressure to fulfill the triple lock promise again next year, especially with the approaching elections.

What you need to know about the increase in the state pension

– The AOW rates will go up from Monday 10 April and from that date people will receive the new rate for periods from that moment on in their next regular benefit after that date.

– The new rates will take effect from the first day of someone’s next full benefit week, so if the payday falls on a Wednesday, it will be from that date.

– Since the AOW is paid in arrears, all previous days and weeks will still be at the rates of 2022/23 at the next payment.

– This approach is applied every year, so that everyone receives the same old age pension for the same number of weeks, regardless of the payday.

– The AOW is paid on a day that is determined by the last two digits of a BSN number. Because the AOW is usually paid four weeks in arrears, the week in which a four-week payment cycle starts depends on the last letter of the NI number (AD).

– For example, for a retiree who is four weeks in arrears when the payday is a Monday, the first full payment at the new rates will be May 8, for the period from April 11 to May 8.

Meanwhile, pension credit, which supplements the income of the poorest pensioners to a minimum weekly level, is also rising by 10.1 per cent to £201.05 for singles and £306.85 for couples.

Pensions Minister Laura Trott says: ‘We are delivering the largest increase in state pensions in history and increasing pension credit for the lowest income earners. This government will always be on the side of retirees and future retirees.”

What do pension experts say?

The increase in triple lock state pensions will be offset by rising food and energy costs, notes Canada Life technical director Andrew Tully.

Food price inflation has added an average of £837 a year to household bills, while rising energy costs have added £1,223 to the average UK household energy bill since April 2022, he says.

Pensioners will be apprehensive and concerned despite the triple lock increase adding £972 a year to those lucky enough to receive the full state pension.

It is also worth remembering that many pensioners do not receive the full state pension and those who applied for their state pension before April 2016 under the old system will receive less – about £14 extra week, or £746 a year.

‘Make sure that you or your family member claim all the financial support you or they are entitled to, e.g. pension credit.

“Get in touch with the charitable organizations that help support the elderly and the more vulnerable, and as relatives or neighbors of the elderly, keep an eye out for them and help where you can.”

Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said: ‘The impending increase in state pensions will provide a welcome boost to retirees who have faced significant increases in their cost of living in recent months.

‘The state pension forms the backbone of people’s pension income and now that inflation continues, the increase of 10.1 percent comes in handy.

However, it’s worth saying that not everyone gets the full amount. Women in particular may have gaps in their service record, which means that they are currently not entitled to a full pension.’

Dean Butler, managing director for clients at Standard Life, says the new full-rate state pension will make up 84 per cent of the tax-free personal allowance of £12,570 from 6 April.

This means that pensioners only need £1,969.80 in income before they start paying income tax. qualify for benefits using the government calculator.

‘Given the substantial increase in the state pension, it is important to realize what this means for the personal allowance, which will only be increased in April 2028.

‘The personal allowance has remained the same in recent years and will therefore gradually bring more and more people into the tax authorities.

‘While 25 percent of pension savings can be withdrawn tax-free, the rest can be taxed. For those with incomes that fluctuate around the personal allowance, it’s worth making sure they don’t take larger lump sums on which they may pay taxes if they can be avoided.

‘If they do have Isa savings, they are not subject to income tax and can therefore be a useful source of extra income.’

Becky O’Connor, director of public affairs at PensionBee, says many people who depend on the state pension after retirement have seen everyday life quickly become unaffordable in the past year.

“Last year, pensioners were not given a raise to match the higher cost of living when the government suspended the triple lock before reintroducing it for this year. So this increase is overdue and will be a huge relief to those struggling to pay their current retirement bills.”

But she cautions questions are likely to be raised about the durability of the triple lock warranty.

Inflation is expected to fall, but is still expected to be relatively high in September.

“So we could see an increase in state pensions next year of about 4 or 5 percent, based on the Office for Budget Responsibility’s inflation projections, still higher than the long-term average of between 2.5 percent and 3 percent annually.”