The state pension will increase by 5% from 6 April to take into account the higher cost of living.
From 2009, someone on full state pension will see their weekly income go up from £90.70 to £95.25. This is the biggest increase since 2001, and comes on top of Christmas bonuses and increased winter fuel payments announced in the pre-Budget report.
Pension credit will also increase from £124.05 to £130 per week, while national insurance benefits will rise by 5% and most income-related benefits will rise by 6.3%.
The government updates the basic state pension people receive each April, at the start of the new tax year, usually in-line with the previous September’s Retail Price Index rate of inflation. In September 2008, this hit 5%.
Rosie Winterton, minister for pensions and the ageing society, says: "In these tough times, the government will continue to give real help to pensioners.”
The increase will be welcomed by the majority of pensioners, many of whom are estimated to be struggling with personal inflation levels of 9.2% for a single male pensioner, 9.1% for a single female pensioner and 7.7% for retired couples.
And with inflation forecast to fall sharply next spring, the increase in the basic state pension could have an even more positive effect on many pensioners.