DWP to give higher payment rises to millions of people on these five benefits

The Department for Work and Pensions is to give bigger payment increases to millions of people on five different types of benefits. The extra amounts will come in from April next year as the new 2025-2026 financial year begins.

While most DWP and HMRC benefits will rise by the low September inflation figure of 1.7 per cent, some others will go up in line with pay growth during May-July, which was a much higher 4.1 per cent, Chancellor Rachel Reeves confirmed in Labour's new Budget. This creates a two-tier benefit system with campaigners calling for moves to even out the disparity.

Analysts had been calling for the government to use the October inflation figure of 2.2 per cent instead of September's 1.7 per cent, which they said was "badly timed" for some of the UK's poorest households, meaning only minimal rises for working-age benefits such as Universal Credit and disability benefits including Personal Independence Payment (PIP). They are asking the government to address this disparity.

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Resolution Foundation economist Lalitha Try had said prior to the Budget: "There was a larger-than-expected fall in inflation last month (September), but it will rise sharply in October, driven by base effects from energy prices. This temporary fall is badly timed for millions of low-to-middle-income families as it will result in a lower increase in their benefits next year.

"A more timely measure of benefit uprating would deliver a cash gain to a low-income family with kids of around £74 next year. The Government needs to address the age divide in benefits which has left working-age support fall further behind rising wages and living standards."

Five benefits will receive a higher rise of 4.1 per cent based on the average growth in earnings. These include the pre-2016 Basic State Pension, where the current maximum 2024/2025 rate is £169.50 a week. This will rise to £175.45 for 2025/2026. The majority - 9.4 million of the 12.6 million total number of pensioners - are on this older version of the State Pension.

The New State Pension, claimed by the other 3.2 million retirees, currently pays a 2024/2025 rate of £221.20 a week to those with full entitlement and this will also rise by 4.1 per cent to £230.25 for 2025/2026 for those with full entitlement. This requires 35 years of National Insurance contributions; anyone with fewer will only get a proportion of the maximum amount.

Likewise, the income top-up benefit Pension Credit Guarantee Credit is to be given a 4.1 per cent rise, with the rate for a single claimant going up from £218.15 a week to £227.10 and the amount received by a couple rising from £332.95 to £346.60 a week. However, the Savings Credit element of Pension Credit will only increase by the same 1.7 per cent as other DWP benefits.

Pension Credit is now a key 'gateway benefit' for securing eligibility to the newly restricted Winter Fuel Payment. The DWP urging people to check if they can claim it because 880,000 older people are believed to be missing out, with Pension Credit worth an average of £3,900 a year, plus the £300 Winter Fuel Payment and other support on top of that.

The other two payments to see a 4.1 per cent rise are Widow's Pension and Widower's Pension, both part of the Industrial Death Benefit claims system. There are two levels of Widow's Pension, with the lower level paying £50.85 a week and the higher level offering £169.50 a week. These will rise next April to £52.95 and £175.45 respectively. Widower's Pension, paid at a single rate, is to go up from £169.50 a week to £174.45.

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