Press release

More help for pensioners as Basic State Pension set to rise in 2011

This news article was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

Pensioners and benefit recipients will get more help in 2011 as the Government today announces that the Basic State Pension will increase.

Pensioners and benefit recipients will get more help in 2011 as the Government today announces that the Basic State Pension will increase by £4.50 to £102.15 in April while the majority of working age benefits will be increased by 3.1%. Low income pensioners will also benefit, as most Pension Credit recipients will see a £4.75 increase in their guarantee credit and as announced in the Spending Review, Cold Weather Payments have been permanently increased to £25 from £8.50.

Minister for Pensions Steve Webb said:

We’ve taken a decision to restore the link with earnings and increase the basic State Pension by the highest of prices, earnings or 2.5%. This triple guarantee will ensure that pensioners can expect a decent offering from the state in retirement.

Alongside the new benefit rates, a consultation setting out proposals and seeking views on the impact of using the Consumer Prices Index (CPI) for private sector occupational pension schemes is also launched today. It looks at whether there is a case for making it easier for occupational pension schemes to move to using CPI. The consultation recommendations propose to preserve and promote confidence in saving into private pensions.

Steve Webb said:

We do not believe that Government should intervene to give pension schemes powers to change their rules if they do not already have such powers and our consultation out today will seek views on this approach. We need to ensure that people can have confidence in their pensions.

Notes to Editors:

  1. The full list of benefit rates for 2011-2012 is published here on Thursday 9 December 2010
  2. The impact of using CPI as the measure of price increases on private sector occupational pension schemes can be found here: The consultation exercise will run until 2 March 2011.
  3. The Occupational Pensions (Revaluation) Order 2010 sets out the minimum percentages by which deferred final salary occupational pensions must be revalued for members reaching scheme pensionable age in 2011.  Through a legislative cross-reference, the Order also sets the minimum percentages by which defined benefit occupational pensions in payment must be increased in 2011 (“Limited Price Indexation”).  In calculating these percentages, CPI has been used to measure inflation over the last 12 months, but RPI has been retained as the appropriate measure of the level of prices for earlier periods.  The Order will be laid before Parliament [later today].
  4. In the emergency Budget the Chancellor confirmed that the Consumer Prices Index (CPI) would be used as the inflation index for increasing pensions and benefits annually. CPI is less volatile, providing more stability for pensioners and benefit claimants whose costs it more accurately represents. It is the headline measure of inflation in the UK and target measure of inflation used by the Bank of England.  For 2011 alone, the Basic State Pension will be increased by RPI.
  5. CPI is also used to calculate the statutory minimum level by which private sector occupational pension schemes can increase their rates each year. Schemes can continue to pay more than the minimum if they chose to. The interaction between scheme rules and the statutory requirements means that these schemes continuing to use RPI will be required to increase pensions by the higher of CPI or RPI in any year where CPI is higher than RPI. To remove this regulatory burden, the consultation will also propose that in those years where RPI is lower than CPI there is an exception to the statutory minimum for schemes that increase pensions in payment by RPI.