New analysis reveals that approximately seven million older pensioners will not benefit from the full 4 percent uplift in the state pension.
The disparity arises due to differences between the “old” and “new” state pension systems, leaving many pensioners with less income than anticipated.
The “triple lock” mechanism, which ensures that the state pension rises annually by the highest of inflation, wage growth, or 2.5 percent, will see the full “new” state pension increase by £460 to £11,962 per year starting in April 2025. This adjustment is in line with current wage growth of 4 percent, benefiting around three million pensioners who retired after April 2016.
However, the 8.5 million people who retired under the “old” state pension system will experience a smaller increase. Their state pension will rise by 4 percent, resulting in a £354 boost, bringing their annual pension to £9,167. But a significant portion of these retirees, about 7.2 million, also rely on an earnings-related pension, known as Serps, which only increases with inflation.
With inflation currently sitting at 2.2 percent, many older pensioners will receive only about half of the increase in the earnings-related part of their pension, potentially missing out on hundreds of pounds compared to younger retirees.
Winter Fuel Payments Cuts to Hit Poorest Pensioners
In addition to the shortfall in state pension increases, many older pensioners are set to lose out on winter fuel payments. At present, pensioners aged 80 and above receive £300 to help with energy costs, while those under 80 get £200. Under Chancellor Rachel Reeves’ new means-tested winter fuel payments system, around 10 million pensioners could be deprived of this benefit, further impacting their financial wellbeing.
Steve Webb, former pensions minister and now with consultancy LCP, cautioned that while the headlines suggest a 4 percent pension rise, the reality is that many pensioners under the old system will not see the full benefits. “The headline figures of a 4 percent pension rise will not be the reality for the vast majority of pensioners on the old state pension system,” Webb said.
Real Impact of the Pension Uplift
Despite the announced uplift, experts warn that inflation will significantly erode the value of the increase. Of the £460 boost, £250 is expected to be offset by rising prices, leaving pensioners with a real terms increase of just £210. This could result in many pensioners feeling financially worse off despite the rise.
Rachel Reeves has claimed that pensioners will be £1,700 better off under Labour policies, but critics argue that these promises will not materialise for all pensioners. Around 20 percent of pensioners rely solely on the state pension as their income, and many do not receive the full amount. Around half of the 3.4 million pensioners on the new system receive less than the full amount, and some 150,000 get less than £100 a week.
Call for Support
Becky O’Connor, of PensionBee, highlighted the growing disparity between pensioners and working-age benefits, noting that many retirees do not receive the full amount of the state pension and are entirely dependent on this income. She warned that the cuts to the winter fuel allowance could hit the poorest pensioners hardest, stressing the importance of maintaining support for those most in need.
A Department for Work and Pensions spokesperson defended the government’s commitment to protecting pensioners, emphasising the role of the triple lock in securing a £1,700 pension increase over the current Parliament. However, they also confirmed that the Serps element of the pension would continue to be linked to inflation rather than the triple lock.
As the April 2025 changes approach, concerns are growing that millions of older retirees could face a financially challenging year ahead.
Amelia Brand is the Editor for HRreview, and host of the HR in Review podcast series. With a Master’s degree in Legal and Political Theory, her particular interests within HR include employment law, DE&I, and wellbeing within the workplace. Prior to working with HRreview, Amelia was Sub-Editor of a magazine, and Editor of the Environmental Justice Project at University College London, writing and overseeing articles into UCL’s weekly newsletter. Her previous academic work has focused on philosophy, politics and law, with a special focus on how artificial intelligence will feature in the future.
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