Published On: Tue, Jan 26th, 2021

State pension payments to rise in 2021 but not all UK pensioners will benefit from boost | Personal Finance | Finance


Both the basic and the new rates will go up in April this year by 2.5 percent. This is thanks to the triple lock, a mechanism which sees the UK state pension rise annually by whichever is the highest out of the average percentage growth in wages in Great Britain, the the percentage growth in prices in the UK as measured by the Consumer Prices Index (CPI), and 2.5 percent.

However much a person is entitled to, some people will miss out on the annual increase in April due to where they live.

The End Frozen Pensions campaign estimates 520,000 British pensioners miss out on the uprating of the state pension due to the countries in which they live overseas.

The government website explains the rules on how the UK state pension may be affected by living abroad.

Guidance states: “Your State Pension will only increase each year if you live in:

  • The European Economic Area (EEA)
  • Gibraltar
  • Switzerland
  • Countries that have a social security agreement with the UK (but you cannot get increases in Canada or New Zealand)

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“You will not get yearly increases if you live outside these countries.”

Should a person return to live in the UK, then their UK state pension would go up to the current rate.

This means that they would then be able to access the uprated amount which will come into effect in April this year.

People who have already retired and who are thinking of moving abroad are directed to contact the International Pension Centre should they want advice on how their pension may be affected.

Following the financial impact and the unprecedented increase in public spending in response to the coronavirus crisis, concerns regarding the future of the triple lock have been raised.

“On April 6, the new state pension will increase under the ‘triple lock’ by 2.5 percent bringing it to £179.60 a week for someone with full credits,” commented Steven Cameron, Pensions Director at Aegon.

“The triple lock gives increases at the highest of price inflation, earnings growth or 2.5 percent and many have suggested it is particularly generous in the current climate.

“The confirmation the triple lock was staying was a relief to many pensioners, but it comes at a considerable cost to those of working age who fund it through their National Insurance.

“We expect more debate around whether it can survive in its current form for another year.”

Meanwhile, Tom Selby, senior analyst at AJ Bell, said: “The value of the state pension triple lock has never been clearer, with retirees set to benefit from an inflation-busting 2.5 percent increase in the value of their state pension benefits at a time when millions of workers face severe pressure on their incomes.

“Whether the Government can continue to maintain its manifesto commitment to older people in the face of unprecedented strain being placed on the nation’s finances by coronavirus remains to be seen, however.

“It’s worth noting that the triple lock guarantee only applies to the basic-rate state pension and the flat-rate state pension.

“Any state pension entitlements built up under the old pre-2016 system will increase in line with CPI inflation at 0.5 percent, as will the value of working age benefits.”



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