Millions of households across the UK are set for a significant financial boost next year after the government confirmed an above-inflation increase for Universal Credit.
A Welcome Income Boost
Following legislation laid in July, all eight million recipients of Universal Credit will see their standard allowance rise by 6.2 per cent from next spring. This uplift is calculated using the Consumer Price Index inflation rate from September, which held steady at 3.8 per cent.
With inflation at this level, the independent Resolution Foundation confirms the standard allowance will be uprated by at least 6.2 per cent. For a single adult aged 25 or over, this translates to a weekly increase of nearly £6 to their standard allowance.
How the Increase Compares
While this rise will be welcomed by families feeling the squeeze from historic price rises, it is slightly smaller than the 6.4 per cent boost that was widely forecast. This forecast was based on an expectation that September's inflation would hit 4 per cent.
Lalitha Try, an Economist at the Resolution Foundation, explained the timing: “Price rises held steady at 3.8 per cent last month – a welcome downside surprise on inflation – but this unfortunately comes at the wrong time for millions of families receiving benefits.”
She added: “September’s inflation rate will be used to calculate benefit uprating in April next year, meaning that a single adult aged 25 and over receiving Universal Credit will see a nearly £6 a week boost to their standard allowance – less than if inflation had been four per cent as forecast.”
Universal Credit Outpaces State Pension
This change means that people claiming Universal Credit will receive a larger percentage increase than pensioners. The New and Basic State Pensions will rise by 4.8 per cent next year, as dictated by the Triple Lock mechanism.
The Triple Lock guarantees that the state pension increases by the highest of three measures:
- Average annual earnings growth (4.8%)
- The September CPI inflation rate (3.8%)
- Or 2.5 per cent
In this case, earnings growth was the highest figure. Meanwhile, Additional State Pension elements and deferred State Pensions will rise in line with the lower September CPI figure of 3.8 per cent.
