Pensions: £2.40-a-week extra for retired people

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The Independent Online

Pensioners will pick up around £2.40 extra a week when the state pension is increased by 2.5 per cent next April. The Chancellor's guarantee to raise the basic handout will give those on a full state pension an annual increase of £124.80, while the weekly amount for couples will rise by £3.85. However, women with reduced entitlement will get just £72.80 extra a year, which works out at £1.40 a week.

A freeze in the winter fuel allowance at £250 for the under 80s, and £400 for the over 80s, will hit pensioners already coping with near-high energy prices and facing forecasts of further increases next year.

The lack of any extra help will leave one in three pensioners struggling in fuel poverty, with the winter fuel allowance now covering just a fifth of the average bill, compared to a third when it was introduced in 1997.

Andrew Harrop, the head of public policy at Age Concern and Help the Aged, warned that things will only get worse. He said a further 70,000 pensioners will be plunged into poverty by 2012 because the Government has not restored the link between basic state pension and earnings.

High-earners saving for their retirement will also be worse off after the Chancellor tweaked the pension system yesterday. He changed the restriction on tax relief on pensions, cutting the income threshold to £130,000 from £150,000.

The move will hit around 300,000 workers, but that may not be the end of the crackdown on pension tax relief, warned Tom McPhail of Hargreaves Lansdown.

"Higher-rate taxpayers should beware this creeping tide of tax relief withdrawal," he said. "First there was no limit; then it was £150,000. Now it is £130,000. Make your pension contributions and get your tax relief while you still can."

For the current tax year – and also in 2010-11 – high-earners can continue to get a higher rate of relief on a payment of £20,000, or an existing regular pension payment, if higher. The Chancellor also announced changes to the introduction of new personal accounts, the automatically-enrolled pension schemes that will be launched in 2012. Under the schemes employers must make sure that workers build up a pension pot.

Mr Darling reduced pressure on smaller firms by giving them until 2015 to enrol their employees. But he also extended the deadline for all employers to reach the full contribution level of eight per cent to 2017. The move is expected to net the Government £2.4bn of savings.

"This may be a short-term gain for the Government but it will lead to higher levels of means-tested benefits, as people will not have as much retirement savings to see them through their later years," said Andrew Tully of Standard Life.


Weekly rise in state pension for couples.

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