He will use his spending review next week to announce that the basic state pension will rise to £119.30 a week from next April as the Government meets its pledge to help to deliver security for on older people as savings are made in other budgets.
He is expected to announce that the basic state pension will see its biggest rise in real terms since 2001. As a share of average earnings, from next April it will not have been higher since 1991.
Mr Osborne is expected to announce that the basic state pension will increase by £174.20 a year. The Chancellor will confirm that it will increase by 2.9 per cent from April 2016 at a time when prices are falling – taking the full state pension to £119.30 a week.
The Government claims that from April 2016 the full basic state pension will be worth around £1,125 a year more in cash terms than in 2010, a figure that will rise to at least £1,770 by the end of the parliament.
Alongside the rise in the basic state Pension, the Chancellor is likely to confirm that the starting rate for the revolutionary single-tier pension. This is claimed by the Government to be the most fundamental reshaping of the system since its inception –
will be worth around £155.
Introducing the new single-tier payment will simplify the state pension system. From April 2016, those reaching pension age will receive the new single-tier state pension, providing a firm foundation for retirement, with the large majority of people building up sufficient National Insurance contributions to become entitled.
It will be a particular boost for women – with 650,000 women getting an average of £400 more a year from 2016 in the first ten years under the reformed system.
Pensions minister Dr Ros Altmann said: “Over the last quarter of a century, pensioners have fallen below the rest of society as average earnings have done so much better than the increases in the state pension. Since 2010, we have really begun to correct that.
“We are now back to the highest level for a quarter of a century – and quite right too.
“Pensioners deserve to be treated much better than they have been in the past and to have security in retirement.”