The state pension will rise by £290 in April, adding up to £5.50 a week to those who retired after 2016, the DWP has said.
The measures, first confirmed in November, will come into force later this year, in line with September’s Consumer Price Index (CPI) inflation rate of 3.1%.
It’s a dramatic drop on the 8% pensioners would have received if the government had kept the triple lock, a manifesto promise to increase the state pension each year by the highest out of average earnings, 2.5% and inflation.
Instead, it will rise by 3.1%, far below a 30-year high in inflation – a measure of how fast items are rising in price.
A 3.1% rise means those on the full new state pension will see their annual income jump to £9,628.50 – an extra £289.50.
Retirees can choose to receive their payments either weekly or monthly.
Choosing to receive the payment every four weeks differs from being paid monthly as the DWP makes 13, four-weekly payments each year over a 52-week period which can result in two payments being made in the same calendar month.
The decision was confirmed after the Social Security (Up-rating of Benefits) Act 2021 received Royal Assent in November.
Under the temporary ‘double lock’ rule, the state pension for the 2022/23 financial year is based on the greater of either annual inflation or 2.5%.
A spokesperson for the DWP said: “In taking this decision, the [UK] Government carefully considered the fairest approach for both pensioners and younger taxpayers, many of whom have been hardest hit by the financial impacts of the pandemic.”
The department added: “In addition, last year, we delivered primary legislation to increase State Pensions by 2.5%, when earnings fell and price inflation increased by half a percentage point. If we hadn’t taken this action, State Pensions would have been frozen.”
However, with an energy crisis sending gas prices up 54% from April, analysts have warned pensioners will struggle to afford the cost of everyday goods.
The Bank of England has previously warned inflation could reach 5% by April when the 3.1% rise kicks in. That’s in response to supply disruption and energy price rises.
The Centre for Economics and Business Research (CEBR) previously estimated this will leave Britain’s elderly £169 worse off in real terms.
CEBR economist Sam Miley said: “Pensioners will be particularly vulnerable to rising prices, due to the fact that their disposable incomes tend to be lower in the first place.
“Meanwhile, the nature of inflation at present, being heavily concentrated in utility prices, is also set to adversely affect pensioners, given that this makes up a relatively larger proportion of their overall spending.”