The most recent inflation report released today will have implications for numerous households receiving benefits and the state pension.
Typically, the inflation data for September determines the percentage increase in various benefits starting from the following April. Today, the confirmed inflation rate for September was announced to be 3.8%, unchanged from the previous month.
While this figure applies to many recipients, such as those on Universal Credit and individuals receiving the state pension, they are likely to receive larger increases.
Every year, the government reviews benefit levels to ensure they align with the rise in general prices, often using the inflation data from the year up to September.
In April of this year, benefits like Universal Credit, Personal Independence Payment, Carer’s Allowance, Income Support, Housing Benefit, and Jobseeker’s Allowance increased by 1.7%, reflecting the inflation rate in September 2024. However, by this April, the same measure had risen to 3.5%.
It is anticipated that the September inflation figure represents a peak and is expected to decrease significantly by next April, based on current projections.
Confirmation of the benefits’ details and the extent of the increase is pending from the Department for Work and Pensions (DWP), with the actual raise depending on the specific benefits received.
Historically, the September inflation rate has been used to determine the uprating for most benefits, suggesting a potential increase of 3.8% next April for many benefits.
Nine benefits mandated by the DWP are required to increase in line with inflation annually in April, while others are subject to Parliamentary approval.
The standard allowance for Universal Credit is set to rise by the September inflation rate plus an additional 2.3%, translating to an increase from £92 to £98 per week for singles and from £145 to £154 per week for couples.
Conversely, there will be a reduction in the “limited capability for work-related activity” element for new claimants with long-term health conditions or disabilities starting next April.
The state pension is adjusted annually in line with the ‘triple lock pledge, using the highest of the consumer prices measure of inflation, average earnings growth, or 2.5%.
Given the lower inflation rate compared to average earnings growth, the full rate of the new state pension is expected to increase by £11 to £241 per week in April 2026.
While individual pension amounts may vary, most new retirees receive the full rate or a similar amount.
Experts point out that the real value of the standard allowance for Universal Credit has decreased by 10% since 2012/13 due to inflation.
Projections by the Office for Budget Responsibility suggested an increase in the total welfare bill next year, with a significant portion attributed to state pensions and other benefits.
Higher-than-expected inflation is predicted to elevate the pensions and benefits bill, potentially leading to a substantial overall increase, according to analysis by the Institute for Fiscal Studies.