State Pension Uprating

The State Pension

The State Pension for people who reached State Pension age (SPA) before 6 April 2016 has two main elements. Different uprating arrangements apply to each:

• For the basic State Pension, the statutory requirement is to uprate it at least in line with earnings (Social Security Administration Act 1992, s150A). However, the Government is committed to increasing it according to the “triple lock” – the highest of earnings, prices or 2.5 per cent (HC Deb 1 October 2020 c559). For uprating in April 2021, the highest of these benchmarks is 2.5%, meaning that the full amount of the bSP will rise from £134.25 to £137.60 pw.
• For the additional State Pension, the statutory requirement is to uprate it at least in line with prices (Social Security Administration Act 1992, s150 (1)). In April 2021, it will increase by 0.5 per cent (HCWS 600, 25 November 2020).

For the new State Pension (nSP), for people reaching SPA from 6 April 2016, the statutory requirement is to uprate it at least in line with earnings (Pensions Act 2014, Sch 12 (19)). In April 2021, the full amount of the nSP will rise by 2.5% from £175.20 to £179.60 pw, in line with the Government’s commitment to the triple lock.

The Social Security (Uprating of Benefits Act) 2020 was needed to enable the State Pension and the Standard Minimum Guarantee in Pension Credit to be uprated in April 2021. This is because the 1992 Act allows an uprating order to be brought forward only if it is positive. Earnings fell by 1.0% year-on-year in the three months to July 2020, as a result of the COVID19 pandemic (HL Deb 13 October 2020 c280GC).

Pension Credit

For people who reached SPA before 6 April 2016, Pension Credit has two elements: the Guarantee Credit, which provides a minimum level of income; and the Savings Credit, which aims to provide an additional amount for people aged 65 and over who have made some provision for their retirement. The legislation requires the Standard Minimum Guarantee (SMG) in Guarantee Credit to be uprated at least in line with earnings. In the years 2010/11 to 2015/16 and in 2018/19, it was incresed by the cash rise in the bSP (i.e. by more than earnings) to ensure the benefits were passed on to the poorest pensioners (Cm 8961, para 1.235). This will happen again in April 2021, when the full rate of the SMG will rise by 1.9%, the same cash amount as the basic State Pension, from £173.75 to £177.10 pw (HCWS600, 25 November 2020).

The other elements of Pension Credit can be uprated by such a percentage as the Secretary of State thinks fit (Social Security Administration Act 1992, s150 (1)). Savings Credit has been removed for people reaching State Pension age from 6 April 2016. People who reached State Pension age before that date may still be eligible. However, measures have been taken to reduce the amount payable in recent years – often through the combination of reductions in the maximum and increases in the threshold of income taken into account to calculate it (PQ226249 9 March 2015).

The actual amounts by which the State Pension and other benefits will increase in April 2021 are in the draft Social Security Benefits (Uprating) Order 2021, which is due to be debated in the Commons on Tuesday 9 February 2021.

Other relevant Library Briefing Papers include: Social Security (Uprating of Benefits Bill) 2019-21, (CBP 9011, Sept 2020); CBP State Pension triple lock (CBP 7812, Dec 2020); and Frozen overseas pensions (CBP 1457, May 2020).