Many get less under the basic state pension although some do get more (Image: Getty)
In practice millions of hard-pressed pensioners will get a lot less and Labour chancellor Rachel Reeves is only making their lives harder by snatching the away. It means 2025 will be a tough year for many, especially with a cold snap looming.
Under the , the rises each year in line with earnings, inflation or 2.5%, whichever is highest.
Many will be looking forward to their next increase, which comes through in April. It will be based on earnings, which rose at 4.1% during the period.
This will lift the maximum from today’s £11,502 to £11,973 a year. Yet that’s well short of what’s required to fund a comfortable retirement.
A single person needs £14,400 a year to enjoy a minimum living standard in retirement, according to the Pensions and Lifetime Savings Association. A moderate standard requires £31,300.
And not everyone on the full new will get £11,973. Roughly half get less because they haven’t got the full 35 years of national insurance (NI) contributions.
Plus there’s a bigger issue.
Some nine million who retired before April 6, 2016, are paid under a different scheme altogether, known as the old basic .
Many will get thousands of pounds less purely as a result of their age.
It’s a long-running problem that few people write about. So I’m trying to put that right at least.
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The basic will also increase by 4.1% from April. It will rise from £8,814 to a maximum of £9,175. That’s £2,798 less than the full new .
It’s a huge difference.
Worse, the difference between the two will have widened by another £110 over the last year. From £2,688 today to £2,798.
And the gap will continue to widen every year. No wonder many older pensioners feel poorly treated.
Both state pensions increase by the same percentage but the new has a higher starting point so each year’s hike is worth more in cash terms.
Soon the gap will exceed £3,000 a year. And it won’t stop there.
But there’s a complicating factor. Not everybody on the basic ends up with less.
Many earn additional on top, such as state second pension (S2P) or state-earnings related pension scheme (Serps).
Typically, older men do better as they were more likely to work and pay NI, building additional entitlement.
Older women often get a pitifully small pension.
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Many are in a desperate plight but their problems are rarely reported, which is why .
The new was designed to help women and has largely succeeded, but it hasn’t helped women on the basic .
The poorest, whether on the new or basic , can plug the shortfall by claiming means-tested top-up Pension Credit.
Yet around a 750,000 who are eligible fail to do so.
In a further blow, they’ll now lose their , too, thanks to Rachel Reeves. That will cost them a further £200, or £300 if over 80.
Labour isn’t to blame for the gap between the new and basic . That’s down to its original design.
But Reeves can be blamed for making things worse by axing the . It’s going to be a long hard winter for many of the oldest pensioners. And snow is on the way.