By Charlie Loran • 21 October 2020 • 8:39
THE state pension is set to rise just £4.40 a week in 2021, in the smallest rise possible allowed by legislation.
The increase means new pensions will rise from £175.20 to £179.60 a week – representing an increase of just £228.80 a year.
However, the old basic-rate state pension will rise by £3.40 a week from £134.25 to £137.65.
The rise, representing 2.5 per cent, will be confirmed later by the government but is all but certain after inflation figures for September came in at just 0.5 per cent.
Under current rules, pensions rise every year by the highest of prices, earnings or by 2.5 per cent.
With earnings reduced by coronavirus and prices rising just 0.5 per cent, that means the 2.5 per cent figure will be used to set pension in 2021.
Tom Selby, the senior analyst at AJ Bell, said, “With Covid-19 hammering wages and pushing inflation to almost 0 per cent, the value of the state pension triple-lock has never been clearer.
If it were not for the policy, pensioners would likely see their state pension frozen next year.
“As it is, retirees are set to benefit from a 2.5 per cent state pension boost in 2021/22, adding £3.40 a week to the value of the ‘old’ basic-rate state pension and £4.40 a week to the ‘new’ state pension introduced in April 2016.
“This will be the 4th time the 2.5 per cent triple-lock underpin has kicked-in since the policy was introduced in 2011/12, meaning the value of the state pension will increase in real terms against both workers’ average wages and the price of goods and services.”
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