Why Is September Inflation So Important

Published / Last Updated on 21/10/2020

September inflation rates published in October by the Office for National Statistics are important because this is the inflation rate for many benefit increases in the following April.  E.g. September 2020 inflation rate is what benefits will increase by in April 2021.

This week the Consumer Prices Index (CPI) for September 2020 was published at 0.5%pa.  This is the rate that many benefits will increase by in April 2020.

Many benefits are increased with the inflation rate such as:

  • Employment Support Allowance (ESA)
  • Income Support
  • Job Seekers Allowance (JSA)
  • Universal Credit*
  • Disability Living Allowance (DLA)
  • Personal Independence Payments (PIP)
  • Attendance Allowance, Carers Allowance
  • Child Benefit, Statutory Maternity Pay (SMP)
  • Other tax credits such as Child Tax Credit, Working Tax Credit etc.

*In theory, these should all rise in April by 0.5% but some benefits have already had special increases during the coronavirus crisis such as Universal Credit.  So they may be adjusted down to mirror a real increase of 0.5%.

The CPI rate also sets changes to other matters such as pensions and the lifetime allowance and many private and company pension scheme payment increases and revlauations.

State Pensions are different.

Currently there is a triple lock on Basic State Pension and New State Pension increases of the higher of a fixed rate, CPI and earnings inflation:

  • Fixed Rate:  2.5%
  • CPI (September): 0.5%
  • Earnings inflation: this is the average total pay (including bonuses) for 3 months from May to July (published in September) = this year it was negative i.e. -1.0%

This means that state pensions will increase by the higher of the triple lock i.e. 2.5%.

This is why September inflation figures are so important.

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