Benefit rates to rise by 6.7% and State Pension and Pension Credit rates by 8.5%

Most benefit rates will increase by 6.7% from April 2024, in line with prices growth, while relevant State Pension and Pension Credit rates will rise by 8.5%, in line with earnings growth. The figures were set out in the Government's response to the Work and Pensions Committee's first report of session 2023-24, received on 12 January 2024 and published on 25 January 2024¹. The changes are subject to Parliamentary approval¹.

The 6.7% figure is September's Consumer Prices Index (CPI) rate of inflation, and the 8.5% figure is the average annual increase in wages across the UK in September, according to the independent benefit calculator entitledto². Pension age benefits are increased under the rules of the triple lock, which uses the highest of wages, September's CPI or 2.5%². The Government said State pension and benefit rates were increased by 10.1% in April 2023 in line with prices growth¹.

Working age benefits rising by 6.7% include Adoption Pay, Attendance Allowance, Carer's Allowance, Child Benefit, Disability Living Allowance, Employment and Support Allowance, Guardian's Allowance, Incapacity Benefit, Income Support, Jobseeker's Allowance, Maternity Allowance, Parental Bereavement Pay, Paternity Pay, Personal Independence Payments, Shared Parental Pay, Sick Pay, Statutory Maternity Pay, Tax Credit and Universal Credit, according to entitledto². Pension age benefits rising by 8.5% are Pension Credit and State Pension².

The Government also said support to households to help with the high cost of living is worth £104 billion over 2022/23 to 2024/25, including two rounds of Cost of Living Payments¹. The first round was made in 2022 to over 8 million households on Universal Credit, Pension Credit and eligible legacy benefits; around 6 million people received a £150 Disability Cost of Living Payment; and over 8 million pensioner households received £300 as a top up to their Winter Fuel Payment¹. The second round, announced on 17 November 2022, is worth up to £900 in three payments: £301 paid between 25 April and 17 May 2023, £300 paid between 31 October and 19 November 2023, and £299 to be paid by spring 2024¹.

Separately, the freeze to Local Housing Allowance rates in place since 2020 will be lifted, with maximum amounts increased to the 30th percentile of local market rents from April 2024, applied for one year². The National Living Wage will rise from £10.42 to £11.44 an hour for those aged 23 and over².

Why it matters for households

The uprating applies to rates paid from April 2024, so the cash amounts people receive change from that point, subject to Parliamentary approval¹. Because working age benefits rise by 6.7% and pension age benefits by 8.5%, the two groups see different increases¹. For private renters claiming Universal Credit or Housing Benefit, the Local Housing Allowance change affects the maximum amount available towards rent, and the 30th percentile means the amount in each category is set to cover the bottom 30% of market rents, so many people will still have to top up their rent from other income².

The abrdn Financial Fairness Tracker, based on a survey of 5,594 households in October 2023, estimated that 4.8 million households, or 17%, were in serious financial difficulties, up from 2.8 million, or 10%, in October 2021³. It found 9% of all households had used a foodbank in the past six months, rising to 24% of those receiving income-related benefits and 20% of those receiving disability-related benefits³. The tracker lists the uprating of working age benefits to 6.7% and the state pension by 8.5% from April 2024 among measures affecting households³.

Which? reported that experts have warned nearly half a million more pensioners may need to start paying income tax in the 2024-25 tax year once the state pension rises in April, because of the triple lock and frozen tax thresholds⁴. It said those over state pension age do not pay National Insurance, but all pensioners pay income tax if their total income, including the state pension, exceeds their personal allowance⁴.

What happens next

The rate increases take effect from April 2024, subject to Parliamentary approval¹. The third Cost of Living Payment of £299 will be paid by spring 2024¹. An evaluation of the Cost of Living Payments is underway, which the Government said will seek to understand their effectiveness as a means of support for low-income and vulnerable households¹. The Local Housing Allowance increase to the 30th percentile is being applied for one year².