Tax hikes & benefit cuts 'to wipe out State Pension increase'

A huge chunk of the impending State Pension pay rise will be wiped out by the hikes to Council Tax and loss of the Winter Fuel Payment.

Many pensioners may have been looking forward to a healthy rise in the State Pension this April, however, it looks set to be wiped out by bill increases elsewhere. 

Thanks to the triple lock, under which pensions must rise each year in line with inflation, wage growth or 2.5%, whichever is highest, the State Pension is due to increase by £472 over the course of the 2025/2026 financial year.

The weekly payments will rise by 4.1% from £221.20 to £230.25 for those on the new State Pension.

However, a combination of hikes in Council Tax and the loss of the Winter Fuel Allowance payments for many pensioners will mean that most of this increase is swallowed up by additional costs.  

Poverty campaigners say that in some areas of the UK up to 85% of this increase will be wiped out.

For example, residents in Birmingham are expected to have to pay an additional £134 a year in Council Tax, after the council voted to increase bills, while losing out on around £233 from the Winter Fuel Allowance, according to research by the Telegraph. 

Meanwhile, those living in Band D properties in Bradford will have to pay an extra £170 in Council Tax a year.

On average, pensioners there received £230 in Winter Fuel Payments in 2023/2024. 

The Government scrapped Winter Fuel Allowance payments for retirees who aren’t eligible for Pension Credit last year.

This means that pensioners who do not qualify for Pension Credit could be as much as £400 out of pocket thanks to the lack of Winter Fuel Allowance payments and Council Tax hikes. 

And, of course, the above analysis doesn't factor in the impact of rising energy bills: the Price Cap is widely expected to rise by around 5% in April, adding an extra £85 to the typical household energy bill.

In fact, over the course of the 2025/2026 financial year, average energy bills are forecast to be around £200 higher compared to 2024/2025.

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Pensioners face 'cruel double whammy'

Local authorities that are responsible for adult social care are unable to increase Council Tax unilaterally by more than 4.99% without holding a referendum. 

Other councils without these responsibilities can only raise payments by 2.99%. 

However, with many councils around the UK struggling financially, six have received central Government permission to increase bills by more than this benchmark. 

"Older people on fixed incomes are facing a cruel double whammy, squeezing their living standards to the point of poverty,” said Dennis Reed, of Silver Voices, a lobby group for pensioners. 

“The research nails the lie that older people will be better off under Labour this year."

However, a spokesperson for the Government said that it had taken a “stricter approach to Council Tax rises than the previous Government, only agreeing to a limited number of increases for those in desperate need.”

"Millions of pensioners will see their State Pension rise by up to £1,900 this parliament through our commitment to the triple lock, and financial support is available to help pensioners on low incomes with council tax bills,” the spokesperson added.