The state pension: 25 pence age addition
Standard Note:
321
Last updated:
15 May 2013
Author:
Djuna Thurley
Section
Business and Transport Section
Pensioners aged 80 and over receive an addition of 25 pence to their state pension. The age
addition was introduced in 1971, in recognition of “the special claims of very elderly people
who on the whole need help rather more than others”. It has never been uprated, with
successive Governments either arguing that greater priority should be given to protecting the
level of the basic benefits, or choosing to target additional resources at older pensioners by
other means, for example, through means-tested benefits or lump sum payments, such as
the Winter Fuel Payment.
The Government has announced its intention to reform the state pension, introducing a
single-tier state pension for future pensioners from April 2016. The single-tier pension will not
include an age addition. However, people already over State Pension age when the reforms
are introduced will continue to receive their state pension in line with existing rules.
Information about these reforms is in Library Standard Note SN 6525 Single-tier State
Pension. Other pensioner benefits are covered in SN 6354 – Pensioner benefits.
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Contents
1
The current system
2
1.1
Introduction
2
1.2
Why the age addition has never been increased
2
1.3
Costs and numbers
5
2
Single-tier state pension
1
The current system
1.1
Introduction
5
The 25 pence age addition is an additional payment on top of the state pension for
individuals aged 80 and above.1 It is paid to those who qualify for a state pension on a
contributory basis or a non-contributory basis.2 People aged 80 or over who do not qualify for
another category of state pension (or are entitled at a lower rate than the Category D rate)
can qualify for a Category D retirement pension provided they satisfy certain residence
conditions.3
The age addition was introduced in September 1971, through the National Insurance Bill
1971. Sir Keith Joseph explained that it was intended to recognise:
albeit in a small way [...] the special claims of very elderly people who on the whole
need help rather more than others ... As they grow old their possessions wear out and
they need help for necessary jobs which they used to do themselves.4
Sir Keith Joseph explained that, as a result of its introduction in 1971 a single person over 80
on the standard rate pension would get £6.25 a week:
The single person over 80 on the full standard rate pension will get from the appointed
day £6.25 a week as against £5 now, and the married couple, where both are over 80
will get £10.20 a week as against £8.10 now. Those are increases of 25 per cent and
26 per cent respectively. 1.2 million will benefit from this age addition. 5
A parallel increase was made to the supplementary benefits scheme (which preceded
Income Support) in order that poorer pensioners on means-tested benefits would also
benefit. 6
1.2
Why the age addition has never been increased
The addition has never been increased. It was specifically excluded from the statutory index
linking provisions of the Social Security Act 1975 (now replaced by section 150 of the Social
Security Contributions and Benefits Act 1992). The Labour Government did float the idea of
raising the age addition in their discussion document, ‘A Happier Old Age’ in 1978:
1
2
3
4
5
6
Social Security Contributions and Benefits Act 1992, section 79 (1)
Social Security Contributions and Benefits Act 1992, s 79 (1)
Pension Service, Guide to state pensions, NP46, April 2005, http://tinyurl.com/2rn7l3 (Internet Archive,
retrieved 16 January 2008)
HC Deb, 3 May 1971, c1019
HC Deb, 3 May 1971, c1019
Ibid
2
4.6 The older generation of pensioners, most of whom are women, tend to be poorer
and their savings have been eroded by inflation and time. For the over 80s an age
addition to pensions of 25p a week was introduced in 1971. For many years ahead the
very old will in general be unlikely to have substantial earnings-related pensions. In so
far as resources permit, is there a case for a higher pension rate at a fixed age without
regard to individual need, or would it be preferable to provide more services for the
very old?
The Conservative Government recognised the extra expenses faced by older pensioners in
their White Paper, “Growing Older”, but made no recommendations on the age addition:
Not only are more people living longer, but the average age of the older generation is
rising. By the end of the century the number of people aged 75 and over is expected to
increase by about one-fifth, and the number aged 85 and over by no less than onehalf. Since it is these men and women – and three-quarters of those aged 85 and over
are women, often widowed and living alone – who are most in need of help and care
and least able to fend completely for themselves, the problem of how to provide this
help will become increasingly acute.7
Governments of both parties have generally resisted suggestions that the age addition
should be increased, either arguing that greater priority should be given to maintaining or
increasing the basic rate of benefit, or choosing to target additional resources on older
pensioners by other means, for example, through means-tested benefits or lump sum
payments, such as the Winter Fuel Payment. For example, in 1977, Mr Orme, the then
Labour Secretary of State for Social Services said:
It has not been the practice of successive Governments to review or increase this
allowance, as greater priority must be given to maintaining and, when possible,
improving the value of the basic rates of benefit. 8
In 1995, the then Conservative Minister in the Department of Social Security, Lord Mackay of
Ardbrecknish, said:
My Lords, we have no plans to up-rate the 25 pence age addition which is paid to all
pensioners from the age of 80. We believe that help should be targeted at pensioners
on low incomes, and we have concentrated resources on the higher pensioner
premium in income support for those aged 80 or over. 9
And in 2003, the then Labour Pensions Minister, Ian McCartney, said:
The 25 pence age addition for state pensioners aged 80 and over was introduced by
the Conservative Government in 1971.
The age addition will be maintained, but on its own it is not the most cost-effective way
to help elderly pensioners. We have gone much further.
We have introduced measures which, from October 2003, will mean that the poorest
third of pensioner households will have gained over £1,500 a year in real terms.
We have introduced free TV licences from age 75 worth over £100 a year, winter fuel
payments of £200 per year for eligible households paid to some 11 million people in 8
million households, and the minimum income guarantee which means that no single
7
8
9
‘Growing Older’, Cm 8173, March 1981, para 1.2
HC Deb, 27 April 1977, cc343W
HL Deb 27 April 1995, c 1021
3
pensioner has to live on less than £102.10 and no couple on less than £155.80 from
April.
We are going further still with the introduction of pension credit from October 2003.
We have therefore found better and more effective ways to help pensioners with the
lowest incomes. 10
In an Adjournment Debate on 26 June 2007, Labour MP, Jeff Ennis, suggested that:
[...] we should scrap the 25p age addition and, by way of compensation, raise the
winter fuel allowance for the over-80s by a minimum of £25 a year. That policy change
would find favour with pensioners, who undoubtedly like the winter fuel allowance. 11
In response, then Pensions Reform Minister, James Purnell said:
When the age addition was introduced, 25p was more money in people’s pockets than
it is now. Then, it was about 4 per cent. of the basic state pension, whereas now it is
less than 0.3 per cent. In 1971, only a small minority of people reached the age of 80,
whereas now there are nearly 3 million people over 80. However, the problem with
increasing the age addition is that it would not be a well targeted measure. As, in
effect, an increase in the basic state pension, it would be taxed for people who pay tax
and means-tested away for those who are on pension credit—and those who are on
the guaranteed credit only would gain nothing at all from the increase.
That is why the Government, in trying to recognise the needs of older people, have
focused on other ways of achieving the same goal. About 3.5 million households with
someone aged 75 now benefit from the free television licence—that is worth £135.50 a
year and in 2007-08 costs about £500 million. It is already making a big difference.
Pension credit makes a particularly significant difference to older people; indeed, more
than a third of those entitled to pension credit are over the age of 80. Pension credit
has particularly benefited older women, especially widowed women, who have seen a
significant difference in the amount that they receive from it.
Most notably, as my hon. Friend said, we have not only introduced the winter fuel
payment but increased it to £200 for pensioners under the age of 80 and to £300 for
pensioners over the age of 80. I recently replied to a parliamentary question, which
asked how much was being spent on the extra fuel costs of pensioners in 1996, and
the answer was £60 million. As my hon. Friend eloquently said, the figure for the winter
fuel allowance is now more than £2 billion. That is another example of difference.
Overall, pensioners over the age of 75 are much better off through the measures that I
have outlined than if we had increased the age addition allowance in line with
inflation—and, indeed, better off even than if we had backdated it. As my hon. Friend
said, it would be approximately £2.50 if it was backdated in line with prices to 1971.
The consequence of our reforms is that pensioner households with at least one
pensioner over 75 are better off by £34 a week. That dwarfs the figure of £2.44.
My hon. Friend asked what the cost of the current 25p age addition allowance is. The
answer is £35 million in this year’s money. I hope that that is helpful, though he will
doubtless argue that that makes his case stronger rather than weaker. However, in the
spirit of openness at this late hour, I thought that I would give him that figure. The
changes that we have made mean that households with pensioners who are over 75
are £34 a week better off. That is significantly more than would be gained even by
10
11
HC Deb 25 March 2003, c 167W
HC Deb, 26 June 2007, c311
4
backdating the age addition allowance to 1971. I understand my hon. Friend’s point
but, if one has any contact with the social security system, one realises that there are
strange byways in it, and we are considering one of them.12
On 19 March 2008, the then Pensions Minister, Mike O’Brien said the Government kept
these issues under consideration:
Mr. Andrew Smith: To ask the Secretary of State for Work and Pensions if he will give
consideration to replacing the 25 pence pension increase at 80-years-old with a
consolidated cash payment. [194881]
Mr. Mike O'Brien: We keep these issues under consideration but we have not
announced any proposal to do this. We recognise that older pensioners on the whole
need help more than others and, since 1997 we have introduced a whole range of
measures which have targeted significant extra help on older pensioners. These
includes: winter fuel payment of £300 and an additional payment for this year,
alongside the winter fuel payment, of £100 to households with someone aged 80 or
over, free TV licences; age related personal income tax allowance for the over 75s;
and pension credit is of particular benefit to this age-group. Over a third of those
entitled to pension credit are over the age of 80. 13
Information about the Winter Fuel Payment and other payments to pensioners is in Library
Standard SN 6354 – Pensioner benefits.
1.3
Costs and numbers
In May 2012 there were some 3.2 million pensioners aged 80 and over. This would put the
annual cost of the 25 pence age addition at some £41 million. If the 25 pence age addition
had been increased by the Retail Prices Index (RPI) since its introduction in 1971, it would
now be around £3.20 per week. The annual additional cost of increasing it to that amount
would be around £500 million.14
2
Single-tier state pension
The Government has announced its intention to reform the state pension, combining the
existing two tiers into a single-tier pension for future pensioners from April 2016. People who
are already over State Pension age when the reforms are implemented will “continue to
receive their state pension (and the Savings Credit, where applicable) in line with existing
rules.”15
The January 2013 White Paper explained that the single-tier pension will not include an age
addition:
51. The Age Addition is an additional payment on top of the basic State Pension for
individuals aged 80 and above. When it was introduced in 1971 it was set at 25p per
week, at a time when the full basic State Pension was £6 per week, and it has
remained at this level ever since. It will be removed under the reforms with the savings
12
Ibid, c312-3
HC Deb, 19 March 2008, c1166-7
14 House of Commons Library calculations. Earlier estimates can be found in e.g.: HC Deb, 5 March 2007,
c1724W and HC Deb, 20 March 2007, c817W
15 DWP, The single-tier pension: a simple foundation for saving, January 2013 (Cm 8528), Executive Summary,
para 13
13
5
recycled into the single-tier system. The Age Addition will be withdrawn for people
reaching State Pension age after the implementation of the single-tier pension. 16
Provisions to introduce the single-tier pension are in Part 1 of the Pensions Bill 2013-14.
Clause 23 and Schedule 12 would provide for the removal of the age addition for people
reaching State Pension age after the implementation date. The Explanatory Notes say:
90.Part 2 also removes several aspects of the current retirement pension scheme for
those reaching pensionable age after the state pension start date:
[...]

The age addition. The age addition to contributory and non-contributory
retirement pensions is paid to people aged eighty or over. It was introduced in
1971 but has never been increased from 25 pence. Provision remains for
those reaching pensionable age before the new state pension start date but is
not replicated for those reaching pensionable age thereafter.17
The background to the reforms is discussed in Library Standard Note SN 6525 Single-tier
State Pension.
16
DWP, The single-tier pension: a simple foundation for saving, January 2013 (Cm 8528), page 98
17
Bill 6-EN
6