Alistair Darling’s pre-Budget report statement means the basic state pension will go up by £2.40 a week even though the Retail Prices Index is in negative figures
The Chancellor said: “For the first time in half a century the retail prices index has been negative for much of this year. Many benefits and tax credits are linked to the September RPI. RPI inflation last September was minus 1.4 per cent. This would have meant no increase in these benefits in April. I do not believe such a freeze would be fair.
“So I can confirm the basic state pension will not be frozen but will rise by 2.5 per cent, 4 per cent in real terms.”
In April the full state pension will rise from £95.25 to £97.65 per week for a single pensioner, while couples will receive £156.16 instead of £152.30.
However campaigners pointed out that the improvement was always guaranteed, and said it would bring most elderly people no real benefit, as their living costs are still rising fast while their other benefits such as the winter fuel allowance have been frozen.
After Labour was condemning for increasing the weekly pension by just 75p at the start of the decade, there has been a commitment that it will also go up by at least 2.5 per cent if inflation is lower.
Charities believe the cost of living for pensioners is increasing higher than for other groups in society, because they spend a greater proportion of their money on food, and on heating and lighting their homes. Many have also seen their retirement income drop over the past year because of low interest rates and reduced dividends for shareholders.
Dot Gibson, general secretary of the National Pensioners’ Convention, said: “The Pre-Budget Report gives with one hand but then takes away with the other and does little to tackle rising pensioner poverty, fuel poverty or the impact that the recession is continuing to have on older savers.
“One in four pensioners still lives in poverty and rising costs of food and fuel, combined with record lows in savings returns and underperforming pensions, mean that pensioners continue to suffer a disproportionate increase in the cost of living.
“In light of all this, the Chancellor’s promise to raise the state pension next year by £2.40 a week but then take more than half of it back again will bring little cheer to Britain’s pensioners.”
Andrew Harrop, Head of Public Policy at Age Concern and Help the Aged, added: “Many older people will be relieved that the Basic State Pension and Pension Credit will both increase above planned indexation. Yet the Government has missed a golden opportunity to promise to restore the link between Basic State Pension and earnings by 2012.
“Sliding beyond this date will plunge an additional 70,000 pensioners into poverty, saving relatively little for the Government – an estimated £250 million a year after 2012.”
WE SAY: Pension payments need to be sufficient to take all pensioners out of the many poverty traps which await them, and assessments of RPI which reflect upon pensions and pension increases should be adjusted to reflect pensioners specific needs – for example, fasting rising heating costs should result in these being given extra weighting in RPI calaculations.
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