Sunday, December 22, 2024

Why Reeves’s claim pensioners will be £1,700 better off is far from the whole truth

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While this represents a 4pc increase, much of the rise is just keeping pace with inflation. Sir Steve Webb, a former pensions minister, said £250 of the increase was just allowing pensioners “to stand still”.

In fact, based on the OBR and Ms Reeves’s assumptions, £1,000 of the increase over the next five years will simply account for price rises, according to Jonathan Cribb, head of retirement and savings at the Institute for Fiscal Studies (IFS). 

It means the change in pensioner incomes will not feel as large as the headline increase.

Mr Cribb said: “A £1,700 per year cash-terms increase in the value of a new state pension between now and 2029 is consistent with OBR forecasts for the next 5 years and keeping the triple lock. 

“But of the £1,700 rise, around £1,050 of that is just keeping up with expected inflation, meaning it looks more like a £650 increase in real terms, and a smaller increase still relative to average earnings.”

Older retirees miss out

The £1,700 figure also doesn’t apply to the majority of pensioners who retired before April 2016.

These people receive the lower basic state pension of £169.50 per week. Roughly 8.5m people currently receive this lower rate, according to figures published by the Department for Work and Pensions (DWP).

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