How much the State Pension has increased by in 2020/2021

Those who receive the State Pension achieved a healthy income boost this month. Read on to see how much the New and Basic State Pensions are worth in the 2020/21 tax year.

The amount the State Pension pays has jumped at its fastest rate since 2012, with retirees receiving up to £342 more a year as of this month (April 2020).

Official figures confirmed that the State Pension is worth 3.9% more this year.

It means retirees on the New State Pension have seen their weekly pay rise to £175 from 6 April 2020, while those on the Basic State Pension get an increased weekly income of £134.

The rest of this article looks in more detail at how the State Pension increases are calculated.

For those who need help bringing in extra cash after they've finished working, take a look at this guide to boosting income in retirement.

State Pension rises and the triple lock

The rate at which the State Pension increases is currently calculated by what's known as the triple lock system.

In short, this means looking at the three figures of annual wage growth to July, inflation as determined by the Consumer Price Index (CPI) in October, and 2.5%.

Whichever is the highest is the one that'll determine the following year's State Pension increase.

With annual wage growth by far the highest at 3.9% – inflation came in at 1.7% – this is the figure applied to the 2020/2021 State Pension.

Now let's look at what this increase works out to in pounds and pennies.

How much the New State Pension pays since 6 April 2020

As a result of our convoluted and, some would say, unfair welfare system, there are two different State Pensions.

Those pensioners entitled to the full New State Pension have seen their weekly payments increase by £6.58 to £175.18, compare to £168.60 last tax year (2019/20).

The change means they'll receive an extra £342 by the end of the current tax year (up from £221 last tax year), with total annual income boosted from £8,767 to £9,109.

Put your retirement plans in your own hands with a Self Invested Personal Pension (SIPP)

How much the old Basic State Pension pays in 2020/21

How much the Basic State Pension will pay (Image: Shutterstock)

Those that receive the full old Basic State Pension have seen their payments increase by a smaller £5.04 a week since 6 April 2020, rising from £129.20 last year to £134.24 in the 2020/21 tax year.

The 3.9% increase means that, annually, these pensioners get a total of £6,980.37 in 2020/21 compared to £6,718.40 last tax year – a rise of around £262 in pure cash terms.

Past State Pension changes

Here’s how the State Pension has been increased over the previous nine years.

 

How State Pension was uprated

Which part of the triple lock kicked in?

April 2012

5.2%

Inflation (CPI)

April 2013

2.5%

Guaranteed minimum

April 2014

2.7%

Inflation (CPI)

April 2015

2.5%

Guaranteed minimum

April 2016

2.9%

Average earnings

April 2017

2.5%

Guaranteed minimum

April 2018

3%

Inflation

April 2019

2.6%

Wage growth

April 2020

3.9%

Wage growth

Boosting your pension income

If you're struggling to make ends meet in retirement, it's vital you ensure you're getting all the help you're entitled to from the Government.

Sadly, it's pensioners on low incomes who are most likely to miss out in this regard, so we've put together this checklist of vital credits and benefits people can get in retirement.

If you've gone through the list and are still struggling financially, take a look at this guide to boosting your income in retirement and this piece on clearing debt

Put your retirement plans in your own hands with a Self Invested Personal Pension (SIPP)

Want more stories like this? Visit the loveMONEY homepage or sign up for our daily newsletter and let us send the news to you!

 

More from loveMONEY:

State Pension: 6 mistakes that impact how much you get paid

Deferring your State Pension: how much can you get and is it worth it?

Find out how much you need to save for retirement

loveMONEY election manifesto: scrap the State Pension triple lock

 

Comments


Be the first to comment

Do you want to comment on this article? You need to be signed in for this feature

Copyright © lovemoney.com All rights reserved.