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Pension and NI benefits
I may be being dense here, but do the increases in state retirement pension and pension credit demolish the commitment to increase benefit by the higher of RPI, CPI and wages. The increase in NI retirement pensions looks slightly lower than CPI to me and the pension credit increase is pants. Or have I misunderstood?
Pension Credit Guarantee basic amounts are tied to earnings by the Pensions Act which is how they escape / avoid the CPI link. At the moment earnings increases are lower than CPI but the OBR background papers that came out yesterday are predicting that they will pass CPI in 2014 on.
In our Future Benefits Model (FFBM) the result of this is, that in current values and using the OBR RPI and earnings forecasts, the basic PC Guarantee figures look like this:
2011 2012 2013 2014 2015
£137.35 £132.41 £137.08 £139.27 £139.27
£209.70 £202.15 £209.28 £212.64 £212.64
The SRP figure is ‘protected’ by the triple guarantee which increases the basic pension by the highest of:
CPI
Earnings
2.5%
(The RPI guarantee was for 2011 only)
The highest is CPI so it is increased by £5.30 (should be £5.3066)
The interesting presentational trick to me is that the government is trumpeting the increase in the threshold for Savings Credit as a good thing. It is in fact a reduction in benefit, and the maximum is still frozen.
“The poorest pensioners will also see the benefit of the triple lock as the Pension Credit Standard Minimum Guarantee rises by £5.35 a week. .”
Quote from DWP press release today
So are they telling complete porkies?
Or making up policy on the fly. A quick look at Directgov shows last years policy:
Pension increases and prices
From April 2011 the government will use the Consumer Price Index (CPI) as the measure of prices.
This will change how much public sector pensions and benefits like the basic State Pension will increase each year.
The CPI and the Retail Price Index (RPI) are used by government and economists to work out how much prices increase each year. The CPI is usually lower than RPI.
The basic State Pension will increase by at least the equivalent of RPI in April 2011 to make sure its value is at least as generous as under previous rules.
Pension Credit
In April 2011 Pension Credit will increase by the cash rise in the full basic State Pension.
[ Edited: 7 Dec 2011 at 12:39 pm by Gareth Morgan ]Looking at the ONS report last week on earnings I can see why the link with earnings for basic Guarantee Pension Credit, set down in the 2007 Pensions Act, is broken again
Key Findings
In April 2011 median gross weekly earnings for full-time employees were £501, up 0.4 per cent from £499 in 2010
For men, full-time earnings were £539, up 0.2 per cent, compared with £445 for women, up 1.4 per cent
Median gross weekly earnings for all employees were £404, the same as in 2010
Median gross annual earnings for full-time employees (including those whose pay was affected by absence) were £26,200, an increase of 1.4 per cent from 2010
Median gross weekly earnings for full-time employees were highest in London at £651 and lowest in Northern Ireland at £451
Between 2010 and 2011 the hourly earnings, excluding overtime, for full-time employees of the bottom decile grew by 0.1 per cent to £7.01 per hour, compared with growth of 1.8 per cent in the top decile to £26.75 per hour
A PC increase of 0% would look bad and drop a lot of people off PC because of the rise in SRP.