BENEFIT BOOST: A rise in inflation is set to push up benefit payments, but will leave the Government with an £18bn bill (Image: Basak Gurbuz Derman via Getty)
Millions of people on benefits and pensions will see their payments rise next year after the latest inflation figure was confirmed. The Office for National Statistics (ONS) announced that inflation for September was 3.8%, the key figure used by the Government to calculate how much benefits will go up from April 2025.
That means payments such as Universal Credit, Personal Independence Payment (PIP) and Carer’s Allowance are expected to increase by around 3.8% next spring.
September’s inflation matters
Each year, the Department for Work and Pensions (DWP) reviews benefit rates to ensure they keep up with the rising cost of living. The September inflation rate has long been used to determine the following April’s increase.
Last year, benefits only rose by 1.7%, based on September 2023’s figure – even though inflation had jumped to 3.5% by the time the uplift came into effect. This time, inflation is expected to ease over the coming months, meaning the 3.8% rise could outpace price increases next year.
MORE ON MONEYWhich benefits will rise
Nine key benefits must legally be increased by the DWP in line with inflation each April. Additional benefits require parliamentary approval.
The benefits that must legally rise with inflation are:
- Personal Independence Payment (PIP)
- Disability Living Allowance
- Attendance Allowance
- Incapacity Benefit
- Severe Disablement Allowance
- Industrial Injuries Benefit
- Carer’s Allowance
- Additional State Pension
- Guardian’s Allowance
Other benefits, such as Universal Credit, usually follow the same pattern – though changes are still subject to final DWP confirmation, reports the Mirror.
Universal Credit changes
The Government has revealed Universal Credit modifications as part of its welfare overhaul, affecting everyone from next April. The monthly sum comprises a ‘standard allowance’ alongside any extra payments based on individual circumstances.
The standard allowance will rise by September’s inflation rate plus an additional 2.3%. That means:
- The weekly rate for single claimants will go up from £92 to £98.
- For couples, it will rise from £145 to £154.
However, the ‘limited capability for work-related activity’ element, which gives extra support to people with long-term health conditions, will be reduced for new claimants from April.
INFLATION IMPACT: The standard allowance element of Universal Credit could rise by 6.4% next April (Image: John Lamb via Getty)How much will the state pension rise?
Under the triple lock guarantee, the state pension increases each April by the highest of three measures: inflation, average earnings growth or 2.5%. With average earnings up 4.8%, this figure will outstrip inflation.
As a result, the full new state pension is expected to rise by around £11 per week, taking it to £241 from April 2026. Whilst not every pensioner receives this exact amount, the majority of newly retired pensioners receive the full rate of the new state pension or an amount very close to this.
Expert reaction
Anna Stevenson, a benefits specialist at the charity Turn2us, welcomed the Universal Credit rise but warned it may not go far enough: “Increasing the standard allowance above inflation is a step in the right direction, but it comes after decades of erosion. Many households will still struggle to meet basic costs because rents, childcare and energy have risen far faster.”
The Resolution Foundation also noted that the real value of Universal Credit’s standard allowance has fallen by 10% since 2012, once inflation is taken into account.
What it means for the Government
In March, the Office for Budget Responsibility (OBR) forecast that inflation would be around 3.2% and average earnings would rise by 4.6%. Based on those figures, the total welfare bill for next year was expected to grow by £16bn – including £7.6bn from the state pension and £8.4bn from other benefits.
However, with inflation turning out higher than anticipated, the Institute for Fiscal Studies (IFS) now estimates the pensions bill could rise by an extra £500m and spending on other benefits by £1.3bn – pushing the total increase to around £18bn.
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