The most recent inflation update was released today, impacting numerous households receiving benefits and the state pension.
The inflation figure for September, which typically determines the upcoming April benefit increases, has been confirmed at 3.8%, remaining unchanged from the previous month.
Recipients, particularly those on Universal Credit and state pension, are expected to receive larger increases than the reported inflation rate.
Annually, the government reviews benefit levels to ensure they align with general price increases, with September’s inflation serving as a key metric.
In April of this year, benefits like Universal Credit, Carer’s Allowance, and others increased by 1.7%, reflecting the inflation rate from September 2024. However, the cost of living had risen to 3.5% by this April.
Forecasts suggest that the current peak in September’s inflation is likely to decrease by next April, pending confirmation from the Department for Work and Pensions (DWP).
Historically, September’s inflation rate has been instrumental in determining benefit upratings, indicating a potential 3.8% increase for many benefits next April.
Certain benefits, including Universal Credit, are mandated to rise annually in line with inflation, while others require Parliamentary approval.
Changes to Universal Credit include raising the standard allowance by the September inflation rate plus an additional 2.3%, resulting in higher weekly payments for singles and couples.
The state pension increases annually based on the ‘triple lock pledge,’ ensuring it rises by the highest of inflation, average earnings growth, or 2.5%.
Considering September’s inflation rate and earnings growth figures, the state pension is projected to increase by £11 to £241 per week in April 2026.
Experts have acknowledged the positive step of increasing Universal Credit above inflation, yet highlight ongoing challenges for households due to rising costs in essential areas.
Studies reveal a decline of 10% in the real value of the Universal Credit standard allowance since 2012/13, primarily due to inflation spikes.
Projections indicate a substantial increase in the welfare bill next year, fueled by higher-than-expected inflation impacting pensions and other benefits.
Analysts estimate that unexpected inflation could lead to a significant rise in the pensions and benefits bill, potentially reaching around £18 billion.
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