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Monday 14th December 2009
State pension freeze saves up to £350m
The pre-Budget report pledge to raise the state pension will not apply to some parts of the pension - potentially saving the Treasury £350m in 2010/11.
The Chancellor said the "basic state pension" would rise by 2.5% in April.
But pensions minister Angela Eagle says extras such as the State Earnings Related Pension (Serps) will be frozen.
She says this will prevent "unfairness" between Serps and company pension schemes. But a BBC report says other pension benefits will be frozen too.
Chancellor Alistair Darling gave his pledge in Wednesday's Pre-Budget report that "basic state pension will not be frozen, but will rise by 2.5% in April".
Nowhere did his speech - or the hundreds of pages of pre-Budget documents - mention the fact that the parts of the state pension which do not count as "basic" would be frozen.
The DWP has confirmed that the small earnings-related supplement called graduated pension, which is paid to more than 10 million people, will also be kept at this year's level.
A DWP spokesperson said: "The additional pension has not increased over and above inflation because it is linked in legislation to wider public and private sector pensions, pushing up the costs and consequences of any change. This was set out in detail to the House of Commons on Thursday.
"During these tough times it's vital our support is targeted at the state pension which helps all pensioners, as well as carers and disability benefits where it's going to make the most difference," the spokesperson added.
And the BBC understands that the additional pension of £57.05 paid to 41,000 men who have wives under 60 will not rise either.
'Confusion and unfairness'
Also under threat is the increase in the extra pension of £7 a week paid to 1.2 million over 60s who have delayed their retirement. That could also be included in the freeze policy when details are revealed on Monday.
The pensions minister said the decision to freeze extras, such as Serps, was taken because otherwise it would have "created an unlevel playing field between the public and the private sector".
She said there would have been "confusion and unfairness" because Serps affect company pension payments and there may have been a difference of approach between public sector pensions and occupational ones partly related to some firms freezing pensions.
Liberal Democrat work and pensions spokesman Steve Webb said: "Once again things are not what they seem.
"Most people don't think of their pension being in bits and when the chancellor says it will rise by 2.5% they expect it all to go up by 2.5%.
Source: BBC News