Rachel Reeves has confirmed a £575 state pension rise before her expected exit as Chancellor, but the increase does not apply to all over-65s. The Labour Party Chancellor is widely expected to be replaced in Number 11 by Birmingham MP Shabana Mahmood, following reports that Ms Reeves will be ousted by new incoming Prime Minister Andy Burnham.
Pension Increase Details
This tax year, the full state pension is increasing by £575 to £12,547 a year, thanks to the Triple Lock policy that Ms Reeves has committed to. However, older seniors on the basic pension will receive a smaller increase of £440, bringing their total to £9,615. These rates are determined by the state pension triple lock, which widens the gap between the two amounts each year.
Eligibility and Pension Tiers
The current state pension age is 66 but is rising to 67. Typically, only men born after 1951 and women after 1953 receive the new, full rate. Everyone else is on the basic pension. The old State Pension has two tiers: the basic State Pension (BSP) – a contributory flat-rate benefit to which people built entitlement based on their National Insurance (NI) record, with 30 ‘qualifying years’ needed (reduced in April 2010 from 44 years for men and 39 years for women) for the full amount. A qualifying year is one in which a person has paid, been treated as having paid, or been credited with enough National Insurance contributions (NICs) for it to count. People with fewer qualifying years get a proportionate amount. The other tier is the additional State Pension, which depended on earnings or deemed earnings during their working life since 1978. People built up entitlement through the State Earnings Related Pension Scheme (SERPS) between 1978 and 2002, and the State Second Pension (S2P) from 2002 onwards.
Expert Commentary and Cost Concerns
Pension experts at Spencer Churchill Claims Advice said: "This increase will be very welcome for millions of pensioners who are finding it increasingly difficult to keep up with rising living costs. However, the policy is becoming significantly more expensive for the Government every year. The triple lock now costs far more than originally forecast." Analysis from the Office for Budget Responsibility has highlighted that the triple lock is now costing around three times more than expected when it was introduced.
