The most recent inflation update was released today, impacting numerous households that receive benefits and the state pension.
The inflation figure for September, crucial for determining benefit increases from April next year, was confirmed today to be 3.8%, remaining unchanged from the previous month.
While the general benefits will reflect this increase, recipients of Universal Credit and state pension are expected to receive larger raises. The government annually reviews benefit levels to match the rise in overall prices, with September’s inflation usually used as the benchmark.
In contrast, last April saw a 1.7% increase in benefits due to the inflation rate in September 2024. However, this year, the same measure surged to 3.5% by April.
It is anticipated that the current peak in September’s inflation will likely decrease by next April. Confirmation from the Department for Work and Pensions (DWP) is awaited to ascertain the exact adjustments, which will vary based on the specific benefits received.
In previous years, the September inflation rate has been pivotal in determining benefit upratings, indicating a potential 3.8% increase for many benefits next April.
Certain benefits, including Universal Credit, are mandated by the DWP to rise in line with inflation annually. Among the changes announced, the standard allowance for Universal Credit will rise by the September inflation rate plus an additional 2.3%.
Moreover, the state pension is set to increase in line with the ‘triple lock pledge,’ ensuring a rise by the highest of the consumer prices measure of inflation, average earnings growth, or 2.5%. Considering September’s inflation, the new state pension is predicted to increase by £11 to £241 per week in April 2026.
Experts highlight that while these adjustments are positive steps, challenges persist for many households due to escalating costs in essentials like rent, childcare, and energy.
The Resolution Foundation notes a 10% decline in the real-terms value of the standard allowance since 2012/13 attributed to inflation increases.
Projections by the Office for Budget Responsibility suggest a significant rise in the welfare bill next year, with inflation and earnings growth playing crucial roles in determining the increase.
Higher-than-expected inflation may lead to a substantial increase in the pensions and other benefits bill, according to analysis by the Institute for Fiscal Studies, potentially nearing an overall increase of £18 billion.
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