The state pension is increasing by 3.9% from 6 April 2020, but tens of thousands could see their income fall as the government ends the allowance for adult dependants.
The rise is thanks to the triple-lock system, which states that the state pension must rise by September’s price inflation, average earnings growth or 2.5% – whichever is higher.
In this case, the state pension will be matching the 3.9% average earnings increase seen by UK workers in July last year.
However, cuts of up to £70 a week will also come into force this year, which could vastly outweigh the pension increases.
Read on to find out how the upcoming state pension changes are likely to affect you, and what to do if you’re out of pocket.
Who will have their state pension reduced?
While pensioners will benefit from the state pension increases this year, those who currently receive the adult dependency increase (ADI) will soon see a reduction of up to £70 a week when the payment is cut in April.
Brought in to give extra support to those who have financially dependent partners, the ADI was closed to new applicants back in 2010. However, 6 April 2020 will see payments stop for everyone, no matter when you started claiming it.
According to a Freedom of Information request from insurer Royal London, more than 11,000 pensioners will lose out from this change. Those claiming the maximum payment would receive £3,640 less over the course of a year, or £3,296 for those who receive the full new state pension increase for 2020-21.
What can you do if your state pension is cut?
If you’re one of those affected, you may qualify for alternative government help.
If you’re not currently claiming pension credit, you may be able to apply after the ADI stops. To be eligible, you must have a weekly income of less than £167.25 if you’re single, or £255.25 if you’re a couple.
How much will the state pension increase by this year?
Those who receive the full single-tier state pension will get £6.60 more each week, with weekly payments rising to £175.20. Over the course of a year, this is an increase of £343.20, taking the total income to £9,110.40.
Pensioners that reached state pension age before April 2016, and who receive the basic state pension, will see weekly payment increases to £134.25, up from £129.20. This equates to a total rise of £262.60 over 12 months, and an annual income of £6,981.
|New state pension (weekly)||New state pension (annual)||Basic state pension (weekly)||Basic state pension (annual)|
|6 April 2019–5 April 2020||£168.60||£8,767.20||£129.20||£6,718.40|
|6 April 2020–5 April 2021||£175.20*||£9,110.40||£134.25*||£6,981|
|Change||+ £6.60||+ £343.20||+ £5.05||+ £262.60|
*Figures rounded to the nearest 5p
What about the additional state pension?
Pensioners who reached state pension age before April 2016 receive state pension payments that are made up of the basic state pension and an additional state pension.
This isn’t linked to the triple-lock system. Instead, the amount you earn is based on the number of National Insurance contributions (NICs) you made during your working life, your earnings, whether you contracted out and whether you topped up your basic state pension.
Additional state pensions will rise by 1.7% for the 2020-21 tax year, in line with CPI inflation in September 2019.
Those on the new flat-rate state pension may also have built up some additional state pension. This is called your ‘protected payment’, which will also rise by 1.7% from 6 April.
What else should pensioners look out for in 2020?
Here are a couple of other changes to keep on your radar this year.
State pension age increases
Another factor to bear in mind is that the state pension age is due to rise to 66 in October, for both men and women.
The state pension age for women has been rising incrementally from 60 since 2010. The pension age rises have been the source of much controversy: last year saw the BackTo60 campaign group bring a case against the government challenging women’s state pension age increases. The High Court found in favour of the government.
The age at which you can start claiming the state pension will continue to rise, reaching 67 by 2028.
Fewer free TV licences for over-75s
This year will also see controversial changes to free TV licences for over-75s come into force.
The BBC announced last year that from June 2020 only households containing one person who receives pension credit will be eligible to receive a free TV licence.
Currently, everyone over the age of 75 is entitled to a free TV licence. The BBC has said the changes are a result of a consultation of 190,000 people, 52% of which were in favour of reforming or abolishing free licences.
How to check your state pension
You’re paid the state pension as a government benefit once you reach state pension age.
The amount you receive depends on when you reached state pension age and the number of NICs you’ve made.
You need at least 35 years of contributions to receive the full new state pension, and at least 10 years worth to receive anything at all.
To get the full basic state pension (for those who reached state pension age before April 2016), you need 30 years of NICs to get the full rate.
— to www.which.co.uk