Boost for pensioners

An older couple walk in the park

Pensioners are set to receive a financial boost as early as January 2009 after chancellor Alistair Darling pledged to pump up benefits and the state pension.

The basic state pension for single pensioners will rise from £90.70 a week to £95.25 next April, but all pensioners will be given a one-off payment of £60 in the new year. This is equivalent to bringing forward the increase to January. Couples will receive a £120 payment.

It is thought around 12.5 million pensioners will benefit from the payments, which are in addition to the £10 Christmas bonus that pensioners already receive.

For women whose entitlement is based on their husbands’ pension, the full couples’ rate will increase to £152.30.

“These are exceptional times and these are exceptional measures,” Darling said as he unveiled the pre-Budget report. “I don’t want people to have to wait for this extra money. I want them to get it as quickly as possible. This will benefit them and benefit the economy.”

Darling added that he was making the increase in line with the highest rate of rising inflation this year, but as inflation has now started to fall, pensioners will be even better off.

Indeed, the government’s projection for RPI (retail prices index) inflation is actually negative for September 2009. But as the basic state pension is indexed to RPI inflation or 2.5% (whichever is greater), pensioners will still receive a 2.5% enhancement to their pension packet even if inflation falls below that level or goes negative.

People on the pension credit also received some good news in the pre-Budget report. This will rise from £124 to £130 a week for single people, and from £189 to £198.45 for couples.

However, the National Pensioners Convention (NPC) described the measures as “peanuts” to pensioners and said the measures did not go “far enough, fast enough” to prevent a recession in retirement.

Joe Harris, general secretary of the NPC, says: “Darling’s proposed rise in the state pension means that millions of people will get an increase next year of just £4.55 a week, and no real extra help with their growing fuel bills. While VAT has been reduced on other goods – it won’t come off of fuel bills – which is where pensioners are feeling real pressure most.”