Autumn Statement 2022: state pension to rise 10.1% in April

Chancellor Jeremy Hunt has pledged to keep the triple lock on the state pension, as well as announcing an uplift to pension credit and a new cost of living payment for pensioners

Senior couple sitting at a dining room table and talking
(Image credit: Getty images)

The chancellor has said he will “fulfil his triple lock pledge to the country”, as he hiked the state pension by 10.1% - its biggest ever rise - to match inflation.

Jeremy Hunt used his first Autumn Statement to announce the good news for pensioners, following months of uncertainty over the triple lock.

Pensioners will receive the bumper increase to their payouts next April. Some will see their state pension income breach £10,000 a year, marking the first time the UK state pension has hit this level.

Hunt also unveiled a surprise 10.1% uplift to the value of pension credit, as well as announcing a new cost of living payment for pensioners.

But, for those not yet retired, there could be bad news to come next year, when a review of the state pension age is to be published. It could mean the state pension age - currently 66 - rises faster than planned.

What’s happening to the state pension?

Hunt cheerfully announced that he would honour the triple lock, ending huge uncertainty after he and prime minister Rishi Sunak had previously failed to commit to it.

The triple lock is a promise that the state pension will rise by inflation, wage growth or 2.5%, whichever is higher.

It means pensioners will receive a 10.1% increase to their state pension in April 2023, in line with the consumer prices index (CPI) inflation measure for September 2022.

The full flat-rate state pension will increase from £185.15 a week to £203.85 a week (£10,600.20 per year).

The basic state pension, paid to those who reached state pension age before April 2016, will increase from £141.85 to £156.20 (£8,122.40 per year).

Tom Selby, head of retirement policy at the investment platform AJ Bell (opens in new tab), comments: “This bumper income rise will undoubtedly be welcomed by millions of retirees, although it is still below the latest CPI inflation readout of 11.1%. If those price rises persist, even the triple lock won’t fully protect pensioners’ living standards.

“It’s also worth remembering that not all pensioners will be in receipt of the full state pension. According to the latest official figures, 15% of retirees receive a state pension worth less than £100 a week, with one in five women taking home a state pension income below this level.”

Increasing the state pension by 10.1% does not come cheap: the policy is estimated to cost the government £10 billion.

What’s happening to pension credit?

Pension credit will also rise in line with inflation, meaning a 10.1% increase next April.

“The decision to uprate pension credit by 10.1% comes as a welcome surprise and will boost the income of single pensioners to around £201,” notes Helen Morrissey, senior pensions and retirement analyst at the wealth manager Hargreaves Lansdown (opens in new tab).

Pension credit is a payment that helps with living costs if you’re over the state pension age and on a low income. It tops up a pensioner’s weekly income to £182.60 if they’re single, or a joint weekly income to £278.70 if they have a partner.

The payment is typically increased each year in line with average earnings growth. The Treasury said that by pegging it to inflation for the April 2023 increase, it will “ensure

pensioners on the lowest incomes are protected from inflation and do not lose some of their state pension increase in the pension credit means-test.”

Morrissey says pension credit can make an enormous difference to those who claim it, adding: “However, not enough people are claiming it and more needs to be done to make sure that those who need it get it.”

The increase to pension credit in line with CPI inflation will cost the government £700m in 2023-24.

Will pensioners get another cost of living payment?

Hunt revealed in his Autumn Statement that a second round of cost of living payments would be made. 

Pensioner households will receive £300. Those on means-tested benefits (including pension credit) will receive £900. And there’s a separate £150 disability cost of living payment.

This means someone receiving pension credit and a disability benefit could receive all three payments, totalling £1,350.

The payments, which are tax-free, will be made at some stage in the 2023-24 tax year.

What’s happening to the state pension age?

The chancellor said a review of the state pension age would be published in early 2023. It will examine whether the existing timetable of state pension age rises “remains appropriate”. In other words, the review could decide that the state pension age needs to rise faster than currently planned - especially if the government is looking to save money - meaning workers have to wait longer to claim the payment. 

The Treasury said: “The review will need to carefully balance important factors, including fiscal sustainability, the economic context, the latest life expectancy data and fairness both to pensioners and taxpayers.”

The state pension age is currently 66. Under the current timetable, it will reach 67 by 2028, and 68 from 2039.

Ruth Emery is contributing editor at The Money Edit. Ruth is passionate about helping people feel more confident about their finances. She was previously editor of Times Money Mentor, and prior to that was deputy Money editor at The Sunday Times. A multi-award winning journalist, Ruth started her career on a pensions magazine at the FT Group, and has also worked at Money Observer and Money Advice Service. Outside of work, she is a mum to two young children, a magistrate and an NHS volunteer.