The basic State Pension will rise by more than it has done for 15 years in real terms in 2016, the Chancellor has said this afternoon.

Announcing his spending review, George Osborne revealed the basic State Pension will rise by £3.35 to £119.30 a week.

On auto enrolment he said to help businesses with the administration the Treasury will align the next two phases of contribution rate increases with the tax years.

He also told MPs he would be setting the full rate for the new state pension at £155.65.

But overall, there was a lack of retirement related content in his speech.

He made no mention of the pension tax relief consultation, launched in July. Much talked about for the ideas on taxing pensions like ISAs, Mr Osborne recently said the full review and conclusions would not be released until the April 2016 Budget.

Mr Osborne told MPs: “Mr Speaker, a civilised and prosperous society like ours should support its most vulnerable and elderly citizens.

“That includes a decent income in retirement. Over 5 million people have already been auto-enrolled into a pension thanks to our reforms in the last parliament.

“To help businesses with the administration of this important boost to our nation’s savings, we’ll align the next two phases of contribution rate increases with the tax years.

“The best way to afford generous pensioner benefits is to raise the pension age in line with life expectancy, as we are already set to do in this parliament.

“That allows us to maintain a triple lock on the value of the state pension, so never again do Britain’s pensioners receive a derisory increase of 75 pence.

“As a result of our commitment to those who’ve worked hard all their lives and contributed to our society, I can confirm that next year the basic State Pension will rise by £3.35 to £119.30 a week. That’s the biggest real terms increase to the basic State Pension in 15 years.”

He said: “Taking all of our increases together, over the last 5 years, pensioners will be £1,125 better off a year than they were when we came to office. We’re also undertaking the biggest change in the state pension for forty years to make it simpler and fairer, by introducing the new single tier pension for new pensioners from April next year.

“I am today setting the full rate for our new state pension at £155.65. That’s higher than the current means-tested benefit for the lowest income pensioners in our society – and another example of progressive government in action.”

Reaction

Martin Tilley, director of technical services at Dentons Pension Management, said: “This was a spending review rather than a true budget, so as expected there were no major announcements in Osborne’s speech surrounding the consideration of the future of tax incentivised pension savings, which we expect to be announced in the Spring Budget.

"Whatever we learn at that time, I cannot see the status quo being retained and therefore individuals should continue to make use of higher rate relief and carry forward allowances as far as they are able, ahead of the end of the current tax year.

“A generally positive spending review. One wonders how much of these are savings that are intended to be funded by planned, but as yet unannounced, revenue from pension incentive savings?”