The most recent update on inflation was released today, impacting numerous households receiving benefits and state pensions.
September’s inflation rate is pivotal in determining the forthcoming increase in various benefits starting from April. The figure for this month has been officially confirmed at 3.8%, consistent with the prior month.
Despite this, many beneficiaries, such as those on Universal Credit and individuals receiving the state pension, can expect larger increments than the stated rate.
The government is mandated to review benefit levels annually to ensure they align with general price fluctuations, with September’s inflation rate typically serving as the benchmark.
Last April, recipients experienced a 1.7% rise in benefits due to the inflation rate recorded in September 2024. However, this year, the same cost of living measure surged to 3.5% by April.
Conversely, it is anticipated that a decrease in inflation rates will occur by next April following the peak seen in September. Confirmation of the specifics and the actual benefit increases are pending approval from the Department for Work and Pensions (DWP).
Historically, the September inflation rate has been instrumental in determining the uprating of most benefits, suggesting a likely 3.8% increase next April for many benefits.
Nine benefits are legally mandated by the DWP to increase in line with inflation annually, while other benefits require Parliamentary approval for adjustments.
In welfare reforms, the government has disclosed modifications to Universal Credit, with the standard allowance set to rise by the September inflation rate plus an additional 2.3%. This translates to an increase from £92 to £98 per week for singles and from £145 to £154 per week for couples.
However, new claimants with long-term health conditions or disabilities may experience a reduction in the “limited capability for work-related activity” element starting next April.
The state pension is annually adjusted in accordance with the ‘triple lock pledge,’ entailing the highest of the consumer prices measure of inflation, average earnings growth, or 2.5%.
Given the lower inflation rate compared to average earnings growth, the full rate of the new state pension is projected to rise by £11 to £241 per week in April 2026.
Though individual pension amounts may vary, most new retirees receive either the full rate of the new state pension or a closely similar amount.
Commenting on the increase in Universal Credit, benefits expert Anna Stevenson from Turn2us mentioned that while it is a positive step, many households may still struggle to cover basic costs due to steep rises in rents, childcare, and energy expenses.
According to the Resolution Foundation, the real value of the standard allowance has declined by 10% since 2012/13 due to inflation spikes.
The Office for Budget Responsibility forecasts an inflation rate of 3.2% and average earnings growth of 4.6%, predicting a significant increase in the welfare bill for the upcoming year.
Higher-than-expected inflation is anticipated to elevate the pensions bill by around £500 million and other benefits by £1.3 billion, leading to an overall increase nearing £18 billion based on analyses by the Institute for Fiscal Studies.