State Pension changes 2021: What will the state pension be in 2021?
State pension: Expert discusses possible 'significant increase'
Millions of pensioners will receive a pay rise in April 2021 as the new tax year begins. The State Pension will rise by 2.5 percent this year, as confirmed by the Office for National Statistics (ONS). The State Pension is the one benefit protected by the unique triple lock guarantee. The triple lock ensures the State Pension rises of inflation, earnings growth or a guaranteed minimum of 2.5 percent.
How does the triple lock work this year?
State Pension payments are protected by the triple lock guarantee.
This means payments are increased every year by whichever rate is higher out of CPI inflation for September, average earnings growth (as of July) or 2.5 percent.
As September’s CPI measure was 0.5 percent and average earnings growth was recorded at minus one percent due to the effects of furlough pay and reduced bonuses, the Government will use the 2.5 percent measures to increase State Pension payments next year.
The Government introduced a new bill recently to ensure State Pension payments would rise next year.
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Previously, the triple lock had included a technical detail which said State Pension payments could only rise if average earnings growth had risen.
Due to the coronavirus pandemic, unfortunately, that wasn’t the case this year.
Average earnings measured minus one percent this year, a figure which, before the new Bill was introduced, would have frozen State Pension payments in 2021/2022.
If you reached State Pension age before April 2016, the State Pension you receive is made up of two amounts – the basic State Pension and an additional State Pension.
The additional State Pension isn’t linked to the triple lock guarantee and instead increases according to CPI inflation each year.
The amount you get depends on the number of National Insurance contributions (NICs) you made before you retired, your earnings, whether you contracted out and if you topped up your basic State Pension.
But if you receive any additional State Pension, you will see a rise of 0.5 percent from April 6, 2021.
If you reached State Pension age after April 2016, you will be eligible for the new flat-rate State Pension, which is currently £175.20 and increased each year by the triple lock guarantee.
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What will the State Pension be in 2021?
Millions of pensioners will be protected from negative earnings growth and receive a 2.5 percent pay rise next year.
The guaranteed minimum won’t be as big as last year’s pay rise of 3.9 percent, which was the biggest State Pension increase since 2012.,
From April 6, 2021, pensioners who are entitled to the full, new State Pension will get £179.60 a week, up from £175.20 in 2020.
The change means pensioners will be better off by up to £228.20 by the end of the 2021/2022 tax year.
The increase will take the annual State Pension income to £9339.20.
Pensioners that reached State Pension age before April 2016 and receive the basic State Pension will see their weekly pension payments rise from £134.25 to £137.65 next year.
This amounts to a £176.80 pay rise in 2021/2022, with income rising to £7,157.80 a year.
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