Osborne to Increase Basic U.K. State Pension by Most in 15 Years

  • Basic state pension will rise 2.9% or 174.20 pounds ($265)
  • Focus on poorer pensioners may damp criticism of welfare cuts

U.K. Chancellor of the Exchequer George Osborne will increase the basic state pension by the most since 2001 in his pre-budget report on Wednesday to protect poorer retirees as he continues to push for austerity in other areas.

The basic state pension will rise 2.9 percent or 174.20 pounds ($265) from April, benefiting 13 million pensioners and bringing the full state pension to 119.30 pounds a week, the Treasury said in an e-mailed statement.

"It will mean people don’t fall into the pension credit penalty and will particularly help women and the self-employed," Pensions Minister Ros Altman said. "Over the last quarter of a century, pensioners have fallen below the rest of society as average earnings have done so much better than the increases in the state pension. Since 2010, we have really begun to correct that."

While the Nov. 25 Autumn Statement may offer some giveaways, Osborne is likely to emphasize the need for continued belt-tightening after data Friday showed Britain recorded the largest budget deficit for any October since 2009.

Pension reform was a touchstone of Osborne’s chancellorship in the last government. By focusing this time on poorer pensioners, he may be seeking to deflect criticism away from planned welfare cuts.

Government spending on the state pension will total about 95 billion pounds on the state pension next year, with the figure rising to 510 billion pounds from 2016-2017 to the end of the parliament, the Treasury said.

The government’s "triple lock" rule on pensions --which guarantees increases in line with prices, earnings or 2.5 percent, whichever is highest-- means someone on a full basic state pension will receive about 570 pounds extra a year from April, compared with uprating by average earnings growth alone over the past six years.

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