Something doesn’t quite add up with the state pension increases this year. While the government’s been shouting about their “ironclad commitment” to the triple lock, millions of pensioners aren’t getting what they think they’re getting.
Here’s what’s really happening behind those cheerful headlines about state pension rises.
The Triple Lock Promise That Isn’t Quite Universal
The state pension triple lock sounds pretty straightforward. Your pension goes up each year by whatever’s highest – inflation, wage growth, or 2.5%. This year, that means a 4.1% increase because wages grew faster than everything else.
But here’s the catch that nobody talks about much.
Nearly seven million older pensioners are getting short changed, and it’s all down to something called SERPS – the State Earnings-Related Pension Scheme. If you’ve never heard of it, you’re not alone. Most people haven’t, which is exactly why this problem flies under the radar.
Who’s Getting Left Behind
Think of your grandparents or older relatives. If they’re men born before 1951 or women born before 1953, they’re probably on the old pension system of state. About 6.9 million of these folks also get extra money through SERPS on top of their basic state pension.
Here’s where things get unfair.
While their basic pension goes up by the full 4.1% thanks to the triple lock, their SERPS bit only increases with inflation. That’s just 1.7% based on last September’s figures. So instead of their whole pension getting that bigger boost, only part of it does.
Steve Webb, who used to be a pensions minister, put it perfectly: “It often comes as a surprise that different elements of the state pension can rise at different rates.”
The Money Gap
Let’s talk real numbers. A pensioner getting both the basic state pension and a decent chunk of SERPS could be losing hundreds of pounds a year compared to someone on the newer system.
The basic state pension is going up by about £360 a year. The new state pension (for people who retired after 2016) is rising by £470 annually. But if you’re getting SERPS payments, that extra bit is only going up by inflation, which is way less generous.
It’s creating a two-tier system where older pensioners – the ones who’ve been retired the longest – are getting less of an increase than newer retirees.
Why This Matters More Than You Think
Becky O’Connor from PensionsBee warns there’s a “hidden layer of pension poverty” that these headlines about state pension increases completely miss. She says: “It’s tempting to think pensioners as a group are cushioned by these annual rises. In reality, millions don’t get the full increases.”
The people affected by this SERPS rule are often the ones who can least afford to miss out. They’re typically older, have been on fixed incomes longer, and many are already struggling with rising costs.
What SERPS Actually Is
SERPS was basically the government’s way of giving people extra state pension based on what they earned during their working lives. The more you earned (up to certain limits), the more extra state pension you’d get.
Some people chose to “contract out” of SERPS, putting their National Insurance rebates into private pensions instead. But millions stayed in, building up this additional state pension that was supposed to give them a better retirement.
The problem is, while the basic state pension gets the protection of the triple lock, SERPS doesn’t. It’s always been tied just to inflation, which is usually the smallest of the three triple lock measures.
The Government’s Response
Ministers keep talking about their commitment to the state pension and how they’re putting more money in pensioners’ pockets. They’re not wrong – the basic state pension is going up.
But they’re not exactly shouting from the rooftops about the millions who aren’t getting the full benefits of these increases.
The Department for Work and Pensions says the state pension system is complex and different elements have always increased at different rates. That’s true, but it doesn’t make it any less frustrating for the people affected.
What You Can Do
If you think you might be affected, check what type of state pension you’re getting. If you retired before 2016 and get extra payments on top of the basic amount, some of that extra might be SERPS.
You can find this information on your state pension statement or by contacting the Pension Service directly. They’ll break down exactly what you’re getting and how much each bit is going up by.
Don’t just assume you’re getting the full 4.1% increase on everything.
The Bigger Picture
This SERPS situation highlights something bigger about how the state pension works. It’s not as simple as one payment going up by one amount each year. Different bits of your pension can increase by different amounts, and unless you know what to look for, you might not realize you’re missing out.
The Office for Budget Responsibility reckons the state pension bill could hit £200 billion by 2073 if the triple lock continues. With pressure like that, some experts think even more dramatic changes might be coming.
For now though, millions of pensioners are dealing with the reality that the state pension increases they’re hearing about on the news aren’t quite what they’re getting in their bank accounts.
And that’s a problem that deserves more attention than it’s currently getting.
