State pension to rise 10.1% this week: what it means for you

This week from 6 April, the full amount of the weekly state pension will increase by 10.1%, the highest ever rise, for 12.5 million retirees. 

It means that starting next Monday 10 April, the amount received by a pensioner on the full New State Pension will exceed £10,000 for the first time (£10,600), with payments of £203.85 a week. 

Meanwhile, those on a basic state pension will get £8,122 a year - or £156.20 a week. 

Becky O’Connor, Director of Public Affairs at PensionBee, says: “Last year, pensioners were denied a rise in line with higher living costs as the government suspended the triple lock, before reinstating it for this year. So this rise is overdue and will come as a huge relief to those struggling to pay the bills on their current pension. 

The change was announced by chancellor Jeremy Hunt in his Autumn Statement in March, after months of uncertainty over the triple lock.

Hunt also unveiled a surprise 10.1% uplift to the value of pension credit. It means pension credit rates will rise to £201.05 for a single person and £306.85 for a couple.

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).

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

Tom Selby, head of retirement policy at the investment platform AJ Bell, comments: “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.”

It's therefore important to check pension credit eligibility - this is a payment that helps with living costs if you’re over the state pension age and on a low income. Claiming this will qualify you for the £900 cost of living payment this year too.

What’s happening to pension credit?

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

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.

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.