January 2021 has arrived, meaning many may well be kicking off the new year by setting their financial goals and budgets for the months ahead. For some, this may involve working out how much what their income will look like.
Those who are state pension age, or who are nearing it, may be interested to hear about a change taking place to the available amount later this year.
In April this year, the payment will rise.
It will increase by 2.5 percent, thanks to the triple lock mechanism.
Under this system, both the basic and the new state pension rise each year by whichever is the highest:
- Earnings – the average percentage growth in wages (in Great Britain)
- Prices – the percentage growth in prices in the UK as measured by the Consumer Prices Index (CPI)
- 2.5 percent.
The government website explains people who have a protected payment will see it rise each year in line with the CPI.
Following the increase, the full new state pension amount will rise from £175.20 per week to £179.60.
Meanwhile, the full basic state pension will change from £134.25 to £137.60 per week.
Not everyone will receive the full state pension, with one reason for this being due to gaps in a National Insurance record.
Furthermore, it’s important to be aware not everyone will be able to enjoy the uprating of the state pension in April 2021.
This can affect some people who claim the UK state pension while living abroad.
Should a person not live in a country in which the UK state pension is uprated each year, then they cannot get the yearly increases.
“Your pension will go up to the current rate if you return to live in the UK,” confirms the government.
According to the End Frozen Pensions campaign, 520,000 British pensioners are affected by this rule.
Guidance has previously stated that the state pension will only rise each year if a person lives in:
- The European Economic Area (EEA)
- Countries that have a social security agreement with the UK (but one cannot get increases in Canada or New Zealand).
With a trade deal having been signed by both the EU and the UK, and the Brexit transition period having come to an end, there is now updated guidance on the UK state pension.
“You can carry on receiving your UK State Pension if you move to live in the EU, EEA or Switzerland and you can still claim your UK State Pension from these countries,” the government website explains.
“Your UK State Pension will be increased each year in the EU in line with the rate paid in the UK.
“You can also count relevant social security contributions made in EU countries to meet the qualifying conditions for a UK State Pension.
“This guidance is for UK nationals, however these rules on the State Pension apply to everyone regardless of your nationality and regardless or when you moved.”