State pensioners warned they could be £20k worse off after inflation soars
As inflation surges to its highest level in 12 months, some Brits who contracted out of the state pension are being urged to check their payments.
UK inflation surged to its highest level for more than a year last month after households were hit by a raft of "awful April" bill increases, official figures have revealed, delivering a huge blow to Chancellor Rachel Reeves.
The Office for National Statistics (ONS) said Consumer Prices Index (CPI) inflation hit 3.5% in April, up from 2.6% in March and the highest since January 2024. The news comes as 10 million UK savers are being told they could be £20,000 worse off because part of their state pension was not linked to inflation.
The number of people affected is the number who contracted out of the state pension to join their employer's defined benefit scheme between April 6, 1978, and April 5, 1997.
When this happened, the state pension element of their pension, known as guaranteed minimum pension (GMP), was not indexed with a cap at 3%. This is what is known as post-1988 GMP.
The issue is believed to affect only those in private final salary-defined benefit schemes, as those in public sector schemes had the GMP part of their pension inflation-linked.
Anyone who retired on or after April 6, 2016, could be affected by the change.
A campaigner who did not want to be named pointed out that the issue only affected those in private schemes, as those in public sector schemes had the GMP part of their pension inflation linked, so they didn’t miss out on any inflation rises. He estimated that some of the pensioners may have missed out on £20,000 by not having their state pension indexed.
A DWP spokesperson said anyone who is concerned should read the online factsheet on the changes—the Guaranteed Minimum Pension (GMP) and the effect of the new State Pension—GOV.UK—and contact the department if they think they have been affected.
The spokesman added, "These changes only affect people who reached state pension age on April 6, 2016, and who can benefit from the transitional rules of the new State Pension."
Retirement expert Just Group is urging those claiming Pension Credit - the main benefit designed to support individuals over State Pension age on a low income - to make sure they are getting their full entitlement.
This advice follows the DWP's estimation that claimants across England, Scotland, and Wales are missing out on roughly £100 million each year, translating to about £700 per household.
Stephen Lowe, group communications director at Just Group, revealed: "About 10% of claimants did not get their full entitlement in 2024/25 compared to 8% the previous years. The amount being underclaimed was also higher at £100 million compared to £80 million previously."
He further noted: "There are about 1.4 million claimants overall, suggesting 140,000 households missed out on an average of about £700, which is a significant sum for those struggling on low incomes."
Who is eligible for Pension Credit?
Pension Credit comes in two parts - Guarantee Credit and Savings Credit.
To qualify for Guarantee Pension Credit, you must have reached state pension age, which is currently 66. Your weekly income also needs to be below the minimum amount the UK Government considers necessary for living.
This stands at £227.10 for a single person and £346.60 for a couple. These figures could be higher if you're disabled, a carer or have certain housing costs.
Savings Credit is only available if you reached state pension age before April 6, 2016, or if you have a partner who reached state pension age before this date and was already receiving it.
