Two million more 'to face means-testing'

State pension payments will rise in line with inflation rather than earnings, the chancellor said yesterday, drawing criticism from pensioner groups that an extra two million people in retirement will be forced to claim means-tested benefits within five years.

Mr Brown said the basic state pension would move up in line with the retail prices index in September, which has risen by 3.1%. The means-tested pension credit, by contrast, will rise in line with earnings, which have grown by 4.3%.

Gordon Lishman, director-general of Age Concern England, said: "The basic state pension is disgracefully low and small increases each year are not good enough."

The state pension will rise from £79.60 to £82.05 a week for a single pensioner and to £131.20 a week for couples.

The pension credit provides a minimum income for poorer pensioners. That will rise from £105.45 to £109.45. It also allows pensioners with a private income to keep some of the benefits paid to claimants of the minimum income guarantee.

Pensioner groups have argued that the switch to boosting retirement incomes through the means-tested pension credit is misguided. They argue that a higher state pension would provide a wider safety net for the poorest.

Mr Lishman said: "Almost two million pensioners are still living in poverty. Although it's good news that the level of pension credit will increase, it's now over a year since it was introduced and almost a third of pensioners still aren't claiming it.

"The government must do more to get this extra cash to older people - too many are still missing out and living a poverty-stricken retirement." Accountant PricewaterhouseCoopers said the number of pensioners eligible for the pension credit could rise from almost 5m to 7m.

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