State pension to rise by £290 in April – check how new DWP changes affect you


Last year, the Prime Minister U-turned on a manifesto promise to raise the state pension by the highest out of average earnings, inflation or 2.5% – instead, it will go up by 3.1% as inflation reaches 5.4%

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State pension 2022 changes – what you need to know

The state pension will rise by £290 in April, adding up to £5.50 a week to those who retired after 2016, the DWP has said.

The measures, first confirmed in November, will come into force later this year, in line with September’s Consumer Price Index (CPI) inflation rate of 3.1%.

It’s a dramatic drop on the 8% pensioners would have received if the government had kept the triple lock, a manifesto promise to increase the state pension each year by the highest out of average earnings, 2.5% and inflation.

Instead, it will rise by 3.1%, far below a 30-year high in inflation – a measure of how fast items are rising in price.

A 3.1% rise means those on the full new state pension will see their annual income jump to £9,628.50 – an extra £289.50.

Retirees can choose to receive their payments either weekly or monthly.

Choosing to receive the payment every four weeks differs from being paid monthly as the DWP makes 13, four-weekly payments each year over a 52-week period which can result in two payments being made in the same calendar month.

The decision was confirmed after the Social Security (Up-rating of Benefits) Act 2021 received Royal Assent in November.

Under the temporary ‘double lock’ rule, the state pension for the 2022/23 financial year is based on the greater of either annual inflation or 2.5%.

The 3.1% increase is in line with September’s inflation figure – the rate factored into the annual state pension increase
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A spokesperson for the DWP said: “In taking this decision, the [UK] Government carefully considered the fairest approach for both pensioners and younger taxpayers, many of whom have been hardest hit by the financial impacts of the pandemic.”

The department added: “In addition, last year, we delivered primary legislation to increase State Pensions by 2.5%, when earnings fell and price inflation increased by half a percentage point. If we hadn’t taken this action, State Pensions would have been frozen.”

However, with an energy crisis sending gas prices up 54% from April, analysts have warned pensioners will struggle to afford the cost of everyday goods.

The Bank of England has previously warned inflation could reach 5% by April when the 3.1% rise kicks in. That’s in response to supply disruption and energy price rises.

The Center for Economics and Business Research (CEBR) previously estimated this will leave Britain’s elderly £169 worse off in real terms.

CEBR economist Sam Miley said: “Pensioners will be particularly vulnerable to rising prices, due to the fact that their disposable incomes tend to be lower in the first place.

“Meanwhile, the nature of inflation at present, being heavily concentrated in utility prices, is also set to adversely affect pensioners, given that this makes up a relatively larger proportion of their overall spending.”

How much will the state pension rise in April 2022?

Men born on or after April 6, 1951, and women born on or after April 6, 1953, are able to claim the new state pension. It changed in 2016, to a slightly higher rate.

To get the full state pension you need a minimum of 10 “qualifying” years in work and 35 years’ worth of National Insurance contributions on your employment record.

The current full, new state pension is £179.60 a week, or around £9,339 a year.

A rise of 3.1% adds an extra £5.56 a week to the payment, increasing it to £185.15 a week.

Over the year that’s £9,628.50, and an extra £289.50.

Those who reached the state pension age before April 6, 2016, get the old state pension, known as the basic state pension which is currently £137.60, or £7,155.20 a year.

A rise of 3.1% adds an extra £4.26 a week to the payment, increasing it to £141.86.

Over the year that’s £7,377 and an extra £221.81.

Is the state pension enough to live on? Let us know your thoughts in the comments section below

If you’re on the state pension, you may be able to get a boost worth a few hundred pounds a year in the form of Pension Credits.

Around one million people are missing out on this support, figures show. It could also offer reductions on bills such as council tax and a free TV License.

Tom Selby, head of retirement policy at AJ Bell, said: “The good news for retirees is the state pension is set to increase by 3.1% next year, increasing the incomes of those in receipt of the full flat-rate benefit by £5.55 a week.

“However, the Government’s decision to suspend the earnings element of the state pension triple-lock means retirees will miss out on a blockbuster 8.3% increase.

“This decision will ‘cost’ someone in receipt of the full flat-rate state pension £9.35 a week in retirement income – or £486.20 over the course of the year.”

If the earnings element of the triple-lock had been retained, the old state pension would have risen by £149 per week and the flat-rate state pension to £194.50 per week.

The savings will net the Treasury around £4.5billion and comes amid a cost of living crisis that will leave pensioners on a rise far below inflation.

Becky O’Connor, head of pensions and savings at Interactive Investor, warned: “While those receiving a state pension can take comfort from it heading up in line with inflation from 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 words 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.

“Older people also tend to loose lower risk investments within their private pensions and are more likely to use cash savings to avoid investment losses later in life, so are more exposed to inflation eroding the value of their wealth. So it is some comfort to know that at least the state pension part of their income is rising in line with inflation.

“However, the economy remains volatile and retired people will be watching to see whether inflation continues to rise. If it does, then next year’s state pension increase may still not feel big enough to cope with rising bills.”

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www.mirror.co.uk

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George Holan

George Holan is chief editor at Plainsmen Post and has articles published in many notable publications in the last decade.

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