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Pensions: Inflation

Volume 488: debated on Friday 6 March 2009

To ask the Secretary of State for Work and Pensions what steps his Department is taking to reduce inflation inequality between people of pensionable age and people of other ages. (258813)

The Department for Work and Pensions is required to review all social security benefits each year to ensure they have retained their value in relation to prices (or, for the standard minimum guarantee in pension credit, earnings). Generally the contributory benefits are increased in line with the retail prices index and the income related benefits increased by the Rossi index which is the retail prices index with the housing elements removed.

The retail prices index takes account of changes in the cost of a wide range of goods and services and reflects the average increases in costs that people face year-on-year. Increasing benefits in line with this measure ensures that benefits keep their real value in broad terms.

The new rates that will come into force from April have been increased in line with inflation as measured last September, when the retail prices index was 5 per cent. and the Rossi index was 6 per cent. These increases are, against a backdrop of falling inflation, in line with the highest increase in inflation last year. The increase in the standard minimum guarantee in pension credit to £130 for single pensioners (£198.45 for pensioner couples) represents the highest up-lift since it came into force in 2003.

The Department recognises that different groups may currently be experiencing varying levels of inflationary pressure and is aware that the Office for National Statistics produces a quarterly ‘Pensioner Prices Index’ that relates to pensioners who derive more than 75 per cent. of their income from state benefits. This measure is not used to increase pensioner benefits because it is not representative of the whole pensioner population, therefore the Department does not consider that pensioner benefits should be up-rated in a different way to benefits for other age groups.

Pensioners have received additional winter fuel payments this year that have increased the payments to £250 for households with someone aged 60-79 and £400 for households with someone aged over 80.

Furthermore, the Department has also increased the Christmas bonus from £10 to £70 and increased the cold weather payment from £8.50 to £25 this year. This additional support goes to entitled recipients of both pension age and working age and provides direct financial support to help vulnerable groups through the economic downturn.