Spending Review: State Pension increase and changes that will impact some workplace pensions

Nov 26, 2020, 15:41 PM by Rachel McCaffery
On 25 November, the Government’s Spending Review confirmed State Pensions will increase by 2.5% in 2021.

 

State pensions will be increased by 2.5% next year. This means those who receive the full new State Pension will receive £179.60 per week from April, instead of £175.20.

Under the ‘triple lock’ system, State Pensions increase each year in line with either inflation, growth in average earnings or 2.5% - whichever is the highest figure.

Changes to some defined benefit workplace pensions

The Government also announced changes to how the Retail Prices Index (RPI) measure of inflation will be calculated from 2030. As a result of the changes, from 2030 RPI is likely to be aligned with another, newer, measure of inflation called CPIH, which is the Consumer Prices Index plus housing costs.

Some defined benefit workplace pensions increase pensions in payment in line with RPI. The CPIH figure is generally lower than the RPI figure so pensions that are affected by the change are likely to increase at a lower rate in future than if they had continued to rise in line with RPI.

The Fund currently increases in line with the Consumer Prices Index (CPI) so this announcement does not change the increases pensioners can currently expect to receive from the Fund.

 

 

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