UK Government Announces Increases to Statutory Payments and Benefits for 2025-26
On October the 30th, 2024, the UK government revealed proposed increases to statutory payment rates and various benefits, which are set to take effect in April 2025. The announcement follows the statutory annual review of state pensions and benefits under the Social Security Administration Act 1992, aligning increases with key economic indicators such as average weekly earnings and inflation.
State Pension and Benefit Increases
A significant focus of the announcement is the 4.1% increase in the basic and new state pensions, as well as the standard minimum guarantee in pension credit. This rise, which reflects the increase in average weekly earnings from May to July 2024 will benefit over 12 million pensioners across the UK. For the new state pension, this equates to an increase of over £470 annually, demonstrating the government's continued commitment to protecting the "triple lock" system. The triple lock ensures that state pensions rise each year by the highest of earnings (wage growth), inflation, or 2.5%, securing the income of older citizens.
In addition to state pensions, other social security benefits, including universal credit and benefits tied to labour market participation will see a 1.7% increase. This adjustment matches the Consumer Prices Index (CPI) inflation rate for the year to September 2024. Benefits that will be affected include the additional state pension elements, pension credit components (excluding the standard minimum guarantee), and statutory payments for workers.
In England and Wales, personal independence payments (for disability) and carer’s allowance will also rise by 1.7%. However, in Scotland, these matters are devolved to the Scottish Government, meaning any increases there will be decided separately. Similarly, Northern Ireland's state pensions and benefits fall under its own devolved authority.
Family and Parental Leave Payments
From April 2025, statutory parental payments will also see a 1.7% increase. This includes Statutory Maternity Pay (SMP), Statutory Adoption Pay (SAP), Shared Parental Pay (ShPP), Statutory Paternity Pay (SPP), Statutory Parental Bereavement Pay (SPBP), and Statutory Neonatal Care Pay (SNCP). These increases ensure that individuals taking time off work for family-related reasons are financially supported in line with rising living costs.
The Small Employers Compensation Rate (SECR), which helps smaller businesses offset the cost of statutory leave payments, remains at 3% for payments made on or after April 6, 2011. The Small Employers Relief (SER) Threshold will stay at £45,000.
Sickness Benefits
In terms of statutory sick pay (SSP), the weekly rate will remain the same across all employees. However, the daily SSP rate will depend on the number of "qualifying days" worked each week. These changes are aimed at supporting workers during periods of illness, ensuring they continue to receive income when unable to work.
Housing Allowance and Benefit Cap
Although not part of the statutory review, the government announced that the local housing allowance (LHA) rates for 2025-26 will remain at 2024-25 levels, following an increase earlier in 2024. Additionally, the benefit cap will remain unchanged for 2025-26.