Page last updated at 19:25 GMT, Saturday, 12 December 2009

State pension freeze saves up to 350m

The Chancellor Alistair Darling
Mr Darling did not mention that parts of the state pension would not rise

The pre-Budget report pledge to raise the state pension will not apply to some parts of the pension - potentially saving the Treasury £350m in 2010/11.

The Chancellor said the "basic state pension" would rise by 2.5% in April.

But pensions minister Angela Eagle says extras such as the State Earnings Related Pension (Serps) will be frozen.

She says this will prevent "unfairness" between Serps and company pension schemes. But a BBC report says other pension benefits will be frozen too.

Most people don't think of their pension being in bits and when the chancellor says it will rise by 2.5% they expect it all to go up by 2.5%
Steve Webb
Lib Dem Work and Pensions spokesman

Chancellor Alistair Darling gave his pledge in Wednesday's Pre-Budget report that "basic state pension will not be frozen, but will rise by 2.5% in April".

Nowhere did his speech - or the hundreds of pages of pre-Budget documents - mention the fact that the parts of the state pension which do not count as "basic" would be frozen.

The DWP has confirmed that the small earnings-related supplement called graduated pension, which is paid to more than 10 million people, will also be kept at this year's level.

A DWP spokesperson said: "The additional pension has not increased over and above inflation because it is linked in legislation to wider public and private sector pensions, pushing up the costs and consequences of any change. This was set out in detail to the House of Commons on Thursday.

"During these tough times it's vital our support is targeted at the state pension which helps all pensioners, as well as carers and disability benefits where it's going to make the most difference," the spokesperson added.

And the BBC understands that the additional pension of £57.05 paid to 41,000 men who have wives under 60 will not rise either.

'Confusion and unfairness'

Also under threat is the increase in the extra pension of £7 a week paid to 1.2 million over 60s who have delayed their retirement. That could also be included in the freeze policy when details are revealed on Monday.

The pensions minister said the decision to freeze extras, such as Serps, was taken because otherwise it would have "created an unlevel playing field between the public and the private sector".

She said there would have been "confusion and unfairness" because Serps affect company pension payments and there may have been a difference of approach between public sector pensions and occupational ones partly related to some firms freezing pensions.

Liberal Democrat work and pensions spokesman Steve Webb said: "Once again things are not what they seem.

"Most people don't think of their pension being in bits and when the chancellor says it will rise by 2.5% they expect it all to go up by 2.5%.

The fact that the chancellor never made this clear in his pre-budget statement looks underhand and shabby
Dot Gibson
National Pensioners Convention

"Britain's pensioners will lose money because the government is shaving off corners where it hopes people won't notice. It's all about getting the maximum good publicity for the minimum spend."

The alleged arrangements were also condemned by National Pensioners Convention general secretary, Dot Gibson.

"Pensioners will be absolutely stunned that only part of their state pension is going to rise next year. This is unprecedented and the fact that the chancellor never made this clear in his pre-budget statement looks underhand and shabby," she said.

"Over 2.5 million older people already live in poverty and millions more are struggling to meet the rising costs of living. This decision will certainly push more into financial hardship."

No other benefits are expected to be frozen in April. The chancellor has already announced that Child Benefit and some disability allowances will rise by 1.5% in April despite the fact that the Retail Prices Index showed inflation below zero in September when the annual rise in benefits is fixed.


Whatever the supposed rate of inflation, pensioners know that it is calculated using a strange sack of reference goods which have little to do with us. What is more important is that fuel prices and council tax will be way ahead the so called inflation rate. Labour really do have a death wish.
Bob, Axbridge

I have been looking at deferring my state pension, over half of the value being in SERPS. I cannot get any information from the pension service about the future of SERPS.

Today's information that it is to be frozen suggests SERPS and second state pensions will become a (below the headlines)target, but for me and many others, SERPS is more important than the headline 'basic' pension.

How can anyone get clarity from the service or the government?
P Thompson, Leighton Buzzard

It may sound as though I begrudge other OAPs a decent living, but I certainly do not.

What I feel is worth noting is the inherent flaw in the "cradle to grave" Benefit System.

This ensures that feckless individuals (there really is no other description) continue their irresponsible ways even into retirement.

This results in the difference between someone such as me easily "clocking up" the required years at work, and someone who for example spent 20 or 30 years in prison.

That difference, when all other benefits accrued are added to the OAP pension for the "feckless one" results in my pension being less than £10 per week more.

Sooner or later such as foolhardy system will collapse.
Peter, Redditch

I have just heard that SERPS and Graduated Pensions will not be increased. Could we please be told whether public service pensions, including those of MPs, will also be frozen.
Lorna, Buckinghamshire

What is missed and maybe not so obvious is that pensioners on benefits, e.g. council or housing, lose out because the benefits are recalculated as a result of the increase in pension and the benefits are therefore less. These pensioners in particular are in need of the extra money.

What they give with one hand they take away with the other!!
Martin, Shrewsbury

Yet another thinly disguised fraud from a so-called government interested only in self-serving headlines. George Osborne is absolutely right- never, ever, trust Labour again.

They always cheat and lie, treat their own whilst screwing the rest of us, and leave the country in ruins. And the message for those yet to retire is absolutely clear; don't trust anyone- do as the Americans do, and invest your money yourself, where you can keep an eye on it and do with it as you see fit.
Harry, Wiltshire

So Alistair Darling is saving money on Pensions. Who needs the money he is saving? How about Pensioners on low incomes.
Robert, Reading

As one of the thousands of overseas pensioners whose pensions are permanently frozen I nevertheless sympathise wholeheartedly with the UK based pensioners who will be disappointed.

How naive of the government to talk of stimulus and yet to fail to put money in the pockets of those who will spend in the areas where stimulus is most needed. Even in the case of overseas Britons I believe that, if given cost of living increases, much of these would find their way back into the UK economy. Food for thought.
Ralph, Malaysia

The comments we publish are not necessarily the views of the BBC but will reflect the balance of views we have received. It is helpful if contributors state if they work for any organisation relevant to an issue discussed. Readers should form their own views on whether messages published represent undeclared interests, or views prompted by a common source.

BBC Radio 4's Money Box is broadcast on Saturdays at 1200 GMT, and repeated on Sundays at 2100 GMT. Download the podcast.

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