State pension, benefits and tax credits increase in April 2014 - how are the new rates are calculated and which benefits are restricted to a 1% increase?

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Since April 2013, there have been two main factors used to increase benefits. Benefits received by disabled people and pensioners will increase in line with CPI inflation (2.7%). Benefits and tax credits for working age people are being increased by 1%. This lower-than-inflation increase (from 2013 to 2015) is in line with the “general economic conditions” and part of the Government’s aim to “ensure the overall affordability of the welfare system.” (Autumn Statement 2012 para 1.155)

The Government has introduced a ‘triple guarantee’ for uprating the basic state pension, which means that from 2013-14 onwards it will be increased by the highest of the increase in earnings, prices (as measured by the CPI) or 2.5%. For the purposes of the 2014-15 uprating, CPI inflation (2.7%) was the highest of these three benchmarks.

The Pension Credit standard minimum guarantee is required to be increased at least in line with earnings; the relevant earnings benchmark rose by 1.2%. However, so that recipients of Pension Credit get the same cash increase as those on the Basic State Pension, the Government has decided to raise the standard minimum guarantee by 2.0% instead. This is being paid for by reducing the amounts paid in Pension Credit Savings Credit.

The main elements of Working Tax Credit have been uprated by 1% in 2014-15. Child Benefit will also be increased by 1% from April 2014.

  • Commons Research Briefing SN06774
  • Authors: John Bardens, Richard Cracknell
  • Topics: Benefits, Pensions

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