The most recent update on inflation was revealed today, impacting numerous households receiving benefits and the state pension. The inflation figure for September, crucial for determining benefit increases next April, has been confirmed at 3.8%, unchanged from the previous month.
Recipients, especially those on Universal Credit and state pension, are expected to receive larger raises than the general inflation rate. The government annually reviews benefit levels to ensure they align with cost-of-living changes, typically using the September inflation rate for adjustments.
In April, certain benefits saw a 1.7% increase based on the September 2024 inflation rate. However, by April of this year, the same measure surged to 3.5%. It is anticipated that the current peak in September inflation will likely decrease by next April.
Details and the extent of the increase will be confirmed by the Department for Work and Pensions (DWP) and will vary depending on the specific benefits received. Many benefits are projected to rise by 3.8% next April, as seen in previous years where September inflation determined most benefit upratings.
Nine benefits mandated by the DWP must increase annually in line with inflation, while others require Parliamentary approval. Universal Credit is set to increase the standard allowance by the September inflation rate plus an additional 2.3%, resulting in a rise from £92 to £98 per week for singles and from £145 to £154 per week for couples.
The state pension increment each April adheres to the ‘triple lock pledge,’ aligning with the highest of inflation, average earnings growth, or 2.5%. Considering September’s inflation rate, the full rate of the new state pension is expected to rise by £11 to £241 per week in April 2026.
Experts note that while the rise in Universal Credit is a positive step, many households may still struggle due to significant increases in expenses like rent, childcare, and energy. The Resolution Foundation highlights a 10% decline in the real-terms value of the standard allowance since 2012/13 due to inflation.
Forecasts suggest a total welfare bill increase of £16 billion next year, with the state pension and other benefits contributing significantly. Unexpectedly high inflation could add around £500 million to the pensions bill and £1.3 billion to other benefits, potentially raising the total increase to approximately £18 billion, according to the Institute for Fiscal Studies.
