George Osborne Set To Increase State Pension

George Osborne is to attempt to deflect controversy over planned spending cuts by announcing a big increase in the state pension.

Ahead of his autumn statement next Wednesday, in which he is set to slash Whitehall budgets, the Chancellor claims he will boost the state pension to the highest share of earnings for 25 years.

According to the Treasury, 13 million pensioners will see their spending power boosted to its highest level for a quarter of a century, with the basic state pension rising to £119.30 a week from next April.

The Government claims it is meeting a pledge to help to deliver security for older people as savings are made in other budgets.

Mr Osborne is expected to announce that the basic state pension will see its biggest rise in real terms since 2001.

As a share of average earnings, from next April it will not have been higher since 1991, according to the Treasury.

The basic state pension will increase by £174.20 a year, an increase of 2.9 % from April 2016 at a time when prices are falling – taking the full state pension to £119.30 a week

The Government claims that as a result someone on a full basic state pension will receive around £570 more a year from April compared to uprating by average earnings growth alone over the past six years.

From April 2016, the full basic state pension will be worth around £1,125 a year more in cash terms than in 2010, a figure that will rise to at least £1,770 by the end of the Parliament.

Alongside the rise in the basic state pension, the Chancellor is likely to say that the starting rate for the proposed single-tier pension will be worth around £155 and be a particular boost for women – with 650,000 women getting an average of £400 more a year from 2016 in the first ten years under the reformed system.

The Government claims the new system will address gender inequality, bringing forward by over a decade the point when men and women will achieve equal payments

In total, the Government says it will spend around £95bn on the state pension next year.

And from 2016/17 until the end of the Parliament, it will spend £510bn out of a total of around £4tn on the state pension.

Pensions Minister Dr Ros Altmann said: "Over the last quarter of a century, pensioners have fallen below the rest of society as average earnings have done so much better than the increases in the state pension.

"Since 2010, we have really begun to correct that.

"We are now back to the highest level for a quarter of a century – and quite right too.

"Pensioners deserve to be treated much better than they have been in the past and to have security in retirement.

"They’ve done their best for society, worked hard and we owe them.

"This Government has restored a decent level of state pension and we have further to go.

"What we're doing with the single-tier, new state pension is providing a decent, base income.

"It will mean people don’t fall into the pension credit penalty and will particularly help women and the self-employed, who have often lost out on the additional bits of the state pension.

"That’s fair and decent."